Some people have their rents paid directly into their LOC. I must say that I am not in favour of this strategy and outline my reasons below. There are 3 possible scenarios with this method: 1. Rent is less than interest In such situations the LOC interest will be capitalising unless there are further deposits made. It is relatively easy to make a deposit, but difficult to get the exact figure right. Capitalising interest raises further deductibility problems. 2. Rent is equal to interest This would be rare as the interest varies each month. But if achievable then there are no immediate issues 3. Rent is more than the interest Here you are paying off debt. This should generally be avoided where there is non-deductible debt as each payment decreases your tax deductions while increasing the incursion of deductible debt. Paying down debt is a good thing in general. But where there is no non-deductible debt I still don’t like this as you are tying up money. Say you wanted to buy a new car but all your money is tied up, you would have to borrow to buy the car and the interest would not be deductible. If instead you had an offset account and deposited the money in there instead of paying down the loan then the interest on your care loan would be indirectly deductible. See Tax Tip 82: Taking money from an offset account on an IP and Claiming Interest Another reason is for ‘retirement’. Say you had been paying extra into the investment loan and you wanted to retire early – you may have to take some money out for living expenses and it you did this the interest on the loan would not be deductible – similar to the above paragraph. Where you are not claiming the interest on the LOC then the above is irrelevant. But why would you not set up your loan in such a way that you could maximise the claiming of interest while at the same time building up cash reserves for personal expenses such as ‘retirement’. Please feel free to pick my theories apart.