I have an Interest only loan for IP with CBA and I recently refinanced to pull out equity. I split the new loan (as I want to use it as deposit for another property and deduct interest). During the settlement of new loan, bank used few hundred dollars from the split to pay off interest pending on old loan and transferred the remaining to my checking account. Ideally, I wanted to use the entire amount of the new split for purchasing new property so that full interest on it is tax deductible. Clean and easy. Now, what do I do? Below are the numbers Old loan - 300k New loan - 300k + 45k Bank used around 800$ out of 45k to pay off the interest on old loan. So now, do I need to apportion interest for the $44,200 every year and claim deduction only on that?