For anyone contemplating a repayment holiday on their loan, you must realise that the lenders will still be charging interest, and this will be added to the loan. This will result in interest on interest being paid. Where the loan relates to an investment property – i.e. it was used to either purchase and/or repair an investment property – the tax aspects need to be considered. The High Court has said that interest on interest can be deductible where the underlying interest is deductible. But there is a possibility that the Commission of the ATO can apply the anti-avoidance provisions to deny deductions if this was done as a scheme to increase tax deductions. One example of a scheme may be this: Example Homer has a home loan an investment loan. Homer asks the lender for the investment property to give him a repayment holiday. As a result, he stops paying the loan for 6 months. This gives Homer an extra $10k cash which he then uses to reduce the loan on this main residence. In a situation like this the Commission could deny the extra deductions as this seems like a scheme to increase deductions on the investment loans. But this doesn’t mean you should not do it – tax advice should be considered. Would it be different if Homer placed the extra $10k in the offset account against his main residence? I think it would be but get your own tax advice. If you do not wish to claim the interest on interest you would need to make some manual calculations and work out the amounts. I don’t think accountants would do this for you.