Is my mortgage tax deductible if I rent out my old home?

Generally the part of the loan used to buy the property may become deductible once it's producing rent. Check your own position with your accountant.

Can I claim the interest on money I pulled out for a car?

Generally no. Deductibility follows the purpose of the debt, not the property it's secured against. Money used for a car or other personal spending doesn't become deductible because the property is now rented.

Does redraw count as part of the original loan?

Generally not. Redrawn money is usually treated as new borrowing for whatever you use it on. An offset account works differently, which is why structure matters if you plan to rent the place out later.

What other costs can I claim on a rental?

Generally the costs of owning and running the rental, like rates, insurance, property management and repairs. Your accountant will confirm what applies to you.

Should I restructure my loan before I move out?

It's worth looking at before you move. Separating loan purposes into splits, and using an offset rather than redraw, can make the rental side much cleaner. Talk to your accountant and your broker together.

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If I move out and rent my place out, does my mortgage become tax deductible?

Bayley Clarke · Mortgage broker on the road · Last checked 11 November 2026 · 3 min read

The short answer

Generally, yes, for the right part of the loan. Any debt that was used to buy that original property may be eligible for deductions once you're renting it out, on the interest as well as other costs of owning the place.

This is where people get caught out. It's about the purpose of the debt, not which property the debt sits on. If you pulled cash out of that loan for a car or a holiday along the way, putting tenants in doesn't make that part deductible. I'm not an accountant, so check your own position with yours.

The 90 second version, filmed from the driver's seat. The rest of this page is the detail underneath it.

The part of the loan that generally counts

Say you bought your first place, lived in it for a few years, and now you're moving on and keeping it as a rental. The money you borrowed to buy it was used to buy what is now an income producing property. So generally, from the day it starts earning rent, the interest on that original purchase debt may be deductible against the rental income.

It's not just the interest either. Other costs of owning a rental, things like the rates, insurance, property management and repairs, generally come into it too. Your accountant is the one who works out exactly what can be claimed and how, but that's the broad shape of it.

Where people get caught out

Here's the trap. Say you bought the property, and later you pulled out $50k against it to buy a car. Five years on you move out and put tenants in. Just because the place is now a rental doesn't mean you automatically get to claim the interest on that $50k against the rental income, because that money was used to buy a car, not to buy or improve an income producing property.

It's about the purpose of the debt, not what property holds that debt. So if you've been doing a bunch of cash outs against the home you live in, and you think putting tenants in is a get out of jail free card that lets you write off all the interest, it isn't. The ATO looks at what the money was used for.

Set it up right before you move

If you know you're going to turn your home into a rental one day, the way the loan is structured matters well before the tenants arrive. Keeping different purposes in separate splits, rather than one big blended loan, makes it a lot easier for your accountant to show which dollars were used for what.

The other one that catches people is redraw. If you've paid extra off the loan and then redraw it for your next home, that redrawn money is generally treated as new borrowing for a personal purpose, not part of the original purchase debt. An offset account works differently, which is why I'll often push for offset over redraw when someone's thinking about keeping their first place long term. Get your accountant and your broker talking before you move, not after.

The honest bit: I'm not your accountant

I'm saying 'generally' on purpose, because tax is your accountant's call, not mine. Your own situation, how long you lived there, what's been drawn, how the loan is split, all of it changes the answer.

Where I come in is the loan structure. Bring me in early and I can set it up so the numbers are clean when your accountant needs them.

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Next question

Do I have to sell, or can I keep this place as a rental?

You can keep it if the numbers pass: your income, the expected rent and the new loan all run through the bank's tests together.