The Property Investment Mistake That's Quietly Costing Investors Money

By Esha Frykberg | Finance with Esha

There's a misconception that comes up regularly in conversations with property investors — and it's one that sounds completely logical until you understand how tax deductibility actually works.

The belief goes something like this: the loan needs to be in the same name as the property owner to claim the interest as a tax deduction.

It's wrong. And acting on it can create a genuinely messy, expensive lending setup.

Where the Misconception Comes From

It makes intuitive sense on the surface. If the property is in your name, the loan should be in your name too, right? And if you own the property jointly, the loan should be joint. People assume there needs to be a clean match between ownership and debt.

The problem is that the ATO doesn't see it that way.

Tax deductibility on investment property interest is determined by who owns the property — not whose name appears on the loan.

A Real Client Example

I recently sat down with a couple who had structured their entire lending setup around this misconception.

She had an investment property in her name. He had one in his. And because they believed the loan needed to match the ownership, they had deliberately kept everything separate — different banks, different loan accounts, different logins.

On paper, it seemed organised. In practice, it had created a long list of problems:

• Multiple banks — no single view of their overall position

• No shared visibility — neither could easily see the other's lending without logging into separate portals

• Multiple sets of fees — paying account fees, package fees, and annual charges across two institutions

• Worse pricing — because their aggregate borrowing was split across two lenders, neither bank saw enough volume to offer competitive rates

They were paying more, managing more, and getting less — all to preserve a tax structure that didn't actually require any of it.

How It Actually Works

Here's a concrete example from my own situation.

I have an investment property held in my wife's name only. The loan against that property is in both of our names — a joint loan.

At tax time, the interest on that joint loan is deducted entirely against her income.

Not split between us. Not allocated to me. All of it to her — because she owns the property. That's what the ATO looks at. The loan structure is largely irrelevant to that calculation.

This is the key point: property ownership determines tax deductibility, not the loan.

The Fix

For the clients I mentioned, the solution was straightforward once they understood the actual rule.

We refinanced their separate loans across two banks into a consolidated structure with a single lender. Same properties. Same ownership. Same tax outcome.

What changed:

• One bank — full visibility across all their lending in one place

• One login — simpler to manage day-to-day

• Fewer fees — one package covering everything

• Better rates — because their combined lending was now sitting with one institution, giving them volume and leverage to negotiate

The tax deductibility was unaffected. Because the properties hadn't moved. And the ATO doesn't care what the loan looks like.

What to Check If This Sounds Familiar

If you've set up your investment lending structure around the assumption that loan names drive tax deductibility, it's worth reviewing a few things:

1. Are you paying fees across multiple lenders that could be consolidated?

2. Is your aggregate lending sitting below rate thresholds because it's split across banks?

3. Do you have full visibility of your and your partner's lending in one place?

A quick conversation with a broker can usually identify whether there's a cleaner, cheaper structure available — without changing your tax position at all.

Esha Frykberg is a Melbourne-based mortgage broker and one of the directors of Market Street Finance. Finance with Esha covers practical lending strategy, property finance, and the things most people don't think to ask their broker.

This article is general in nature and does not constitute financial or tax advice. Speak to your accountant regarding your specific circumstances.