Who can claim
This deduction is available to individuals and companies.
- The borrowed funds are used for the rental-income-producing property or another eligible rental purpose.
- Eligible borrowing expenses include costs such as loan establishment fees, title-search fees and mortgage-document costs that satisfy section 25-25.
What you cannot claim
- Principal repayments are not deductible.
- Private redraws or mixed-purpose loan use must be excluded or apportioned by tracing the use of the borrowed funds.
- Stamp duty on the property transfer and legal costs to acquire the property are not borrowing expenses.
How the amount is worked out
Claim deductible interest for the income-producing use. If total eligible borrowing expenses are $100 or less, claim them in the year incurred. If they exceed $100, spread them over the shorter of five years or the loan term, using the number of relevant days in the first and last years. If the loan is repaid early, any remaining eligible amount is generally deductible in that year.
Records the ATO expects
- Loan agreement
- Interest statements
- Borrowed-funds tracing
- Borrowing-cost invoices
- Loan start, end and early-repayment dates
- Borrowing-cost schedule
Where this rule comes from
Primary source: Income Tax Assessment Act 1997 section 25-25 (Section 25-25). Reviewed 30 July 2026. Covers the 2025-26 and 2026-27 income years.
Supporting sources:
- ATO Rental properties guide 2026 (Rental properties guide 2026)
- Income Tax Assessment Act 1997 section 8-1 (Section 8-1)