I am currently on hold to the ATO for help, but wanted to put the question on here to get the opinion of accountants who specialise in Property taxation. Scenario: Home mortgage and IP mortgage are separate accounts in a "pool" of funds set up as a Line of Credit facility. Both accounts are interest only, with interest capitalising each month. ALL incomes go to the home mortgage account and this will eventually reduce to zero, and the available funds in the pool will in turn increase. The IP mortgage account will remain untouched for as long as there is a balance in the home mortgage account. The IP mortgage account will not have any income deposited, and all IP expenses will be paid from this account. The interest on the IP mortgage is capitalising. I have been researching taxation on Investment Properties and have come across Tax Determination 2012/1 and I am now convinced that our current mortgage structure is EXACTLY the same as the structure discussed in the Determination. Which means we can't claim any IP loan interest as an expense. Have I interpreted this correctly? Is there ANY way that the interest (or part of the interest) on the IP loan can be claimed? What else should I be looking into to make a more informed decision about the tax implications of our current loan structure? I took my query back to the organisation who set us up with this facility and their response was, and this is a direct quote: "It is my understanding that your investment debt and the interest occurred from investment debt is fully tax deductable when you own at least two properties and one of them must be owner occupied with the other as an investment property. However I am by no means an accountant so please do seek the advise from a qualified taxation accountant." Their whole grand plan when we had our first meeting was to claim all interest on our IP loan, to reduce our IP income. They never once told me that there would be tax implications by setting it up this way. And it doesn't sound like they even are aware of this Determination. I have just got off the phone from the ATO. She couldn't give me an answer straight away and she has passed my query on to a specialist who will get back to me in 48 hours. If any accountants who know this inside-out could please give me some advice I would be VERY grateful!!