Claiming deductions on mortgages this tax time

While mortgage interest on primary residences is not tax-deductible, there are a variety of other loans that are.

For example, investment property interest can be claimed on tax returns. Similarly, so can the interest on loans taken out for conducting repairs, organising renovations, or purchasing depreciating assets for the property.

“Claiming mortgage interest is an effective tax deduction which is a part of the tax minimisation strategy widely known as negatively gearing a property. This is when the cost of owning the property that is being rented out outweighs the rental income being generated. This can apply to both commercial properties and residential properties,” said Jade Crowther, financial accountant at Lottoland.

“Interest paid on the mortgage of your main place of residence (owner-occupier) is not tax-deductible, only commercial property and investment properties generating assessable income are tax-deductible.”

For employers, getting a handle on business loan deductions can help maximise cost savings this tax time. There are a variety of claims to be made. Interest on loans used to purchase things like equipment and repairs can be deducted and loan repayments can count as a business expense.

“Property holders can claim an immediate deduction for interest on their mortgage loan as well as various other expenses that occur such as water rates, repairs and maintenance strata rates and so on. The property itself, is capital in nature and is not deductible, however if capital works are completed on the property, there are deductions available to claim the depreciation over several years,” said Crowther.

Not everything is included, however, as according to New Wave: “If the loan is used for other purposes, such as to cover operating expenses or to purchase inventory, then the interest on the loan is not tax deductible. If you use the loan for working capital, the interest can be deductible, but only up to a certain amount.”

Crowther said that accountants are a massive help with these types of inquiries: “There are many lucrative deductions to help make the most of tax savings on property income and I would suggest that those who hold mortgages producing assessable income to seek out the help of a taxation accountant, and (if necessary) a qualified quantity surveyor to prepare a tax depreciation schedule (only relevant if claiming capital works) to help them navigate what they can and can’t claim in their tax.”

Keeping tax smart this tax time can help to manage cost savings.

[Related: How will stage 3 tax cuts increase borrowing capacity?]

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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