What are the implications for claiming interest when a property is a PPOR initially, then an IP, and turned back into a PPOR? I have a property that was initially a PPOR with a PI loan of $355500. From what I understand, while it was a PPOR I could not claim any interest. When I turned into an IP, the loan was switched to IO, and I had paid down the loan to $350K. I was able to claim interest on $350K as a deduction. When I turn it back into a PPOR, I am unable to claim the interest again on this 350K. What I can't get around is when it becomes more complex. I have 2 issues here: 1. When the property was turned into an IP, a loan for $77K was also released as a LOC. This was used to build a granny flat for the property. I have refinanced since then and the total loan is $428K (350+77) for that one property. I can claim interest on the $428K while it was an IP. When I turn both the main property and GF into a PPOR, I cannot claim interest on any of this amount. Does it matter that I borrowed $77K to build a granny flat? 2. When I refinanced, the loan was split into 2 Loans, $428K as loan 1 $Equity as loan 2 I have paid rates and expenses from loan 2 (borrowed money) for the property while it was an IP. (Approx 2K worth) When it turns into a PPOR, obviously these rates and expenses cannot be claimed. I also used some of this equity money to pay a deposit of $60K for IP2 and rates for IP2. Once it turns into a PPOR, am I able to simply pay back $2K into the equity account to cancel out the amount owing? Obviously the $60K is still deductible as IP2 still remains an IP? Should I separate the $2K used for IP1 Expenses and pay that off, or have I tainted my money forever and none of the money in the Equity loan can then be claimed?