Tax Deductibility of Breaking a Fixed loan on Owner Occupied Property with the Purpose of Buying an Investment Property Borrowing costs are deductible over a 5 year period or over the life of the loan if shorter. This means breaking a loan and incurring break costs can be deductible in full in the year the loan is broker if the loan relates to an investment property. See some issues I have written about here: Tax Tip 29: Timing the breaking of fixed loans But, Toby raised an interesting question on this thread: Qantas Credit Union If someone has an owner occupied loan, relating to the purchase of the owner occupied house, with bank A and this loan is fixed will the break fee be deductible if this loan is broken so that the loan can be moved to another bank B with the purpose of borrowing more to buy an investment property? The answer I think is "No". This is because the loan relates to the purchase of the owner occupied property and breaking this loan would, therefore, be a private expense. What if the original bank refused to lend anymore and the new bank would and the borrower, therefore, had to refinance to get the investment loan? Bank A may have stricter serviceability than Bank B for example. This doesn’t change the situation in my opinion. The purpose would still be to break an owner occupied loan.