I bought an IP about nine years ago for $500k in Melbourne Eastern Suburbs in a joint name with my name (equal share) and recently got a council planning approval for two side by side town houses. If I build two town houses, subdivide, live in one, rent out the second one, and each property is valued at $700k after the construction with a total loan of $1mil (construction + original purchase price), what is the best loan structure for both of the properties, to maximise the deductions on the IP and whilst taking minimal loan on PPOR as the expenses are not deductible? 1. If I finance the loan of Sub divided IP with $700k (100% of value) and $300k on PPOR, am I able to deduct all the expenses on IP (IO with 100% loan and other expenses). Note that loan is not equally distributed though the cost is the same for both.) 2. What would be the tax implications of keeping one and selling another? 3. What are the tax implications of selling one property immediately or after one year or after 5 years? 4. When is the best time to sub-divide the lot into two?. After demolition ? or after completing the construction and subsequent financing? or ?