Further Borrowing against property will be deductible against the income it generates I often come across people who say things like “My property is slightly positive geared, i don’t want to borrow against it any further as it will cause the property to be negative geared.” This is not correct because it is the purpose and use of the borrowed money that determines deductibility. The security for the loan doesn’t matter. So if I owned 123 Smith Street and had a 50% LVR and increased my loan to 90%, to buy 456 Jones Street, this won’t affect the cash flow for 123 Smith Street because the extra money will be deductible against the new property at 456 Jones Street which I used the money for. On tax returns the interest has to be claimed against the correct property. It is also important to split the loans because when the property that it relates to is no longer income producing the interest will no longer be deductible.