Buying a Rental Property in Launceston: Loans and Tax

If you want to buy a rental property in Launceston, the loan structure matters as much as the property you choose.

A lender looks at your income, your debts and the rent the property could earn. The way you set up your investment loan then decides your repayments, your flexibility and how your tax position is handled. This article walks through the main choices so you can talk to a broker with confidence.

How Much Can You Borrow for an Investment Property?

Your investment loan amount depends on your income, your existing debts and how the lender assesses your ability to repay. Each lender sets its own policy, so the figure can differ from one lender to the next.

Banks, credit unions and building societies (called ADIs) must test your repayments at a rate at least 3.0 percentage points above the loan's actual rate. Non-bank lenders are not bound by that particular buffer. Rent from the new property can count as income, but APRA's guidance says prudent lenders count no more than 80 per cent of expected rent, to allow for gaps between tenants.

Existing debts also reduce what you can borrow. Lenders look at things like your current loan balances and the limits on your credit cards, not only what you owe today. You can get a starting figure with our borrowing capacity page, and a broker can then test it against different lenders.

Interest Only or Principal and Interest: Which Suits an Investor?

Interest only means you pay just the interest for an agreed period, while principal and interest means each repayment also reduces the loan. Interest only gives lower repayments in the short term, but your loan balance does not fall during that period.

Interest only does not increase how much you can borrow. Lenders assess the loan as if you will repay principal and interest over the remaining term once the interest-only period ends. A 30-year loan with a 5-year interest-only period is assessed over the final 25 years.

As an example, consider a buyer with a $500,000 loan at an illustrative rate of 6.75% p.a. Interest only would cost about $2,813 a month, which is $500,000 x 6.75% divided by 12. After a 5-year interest-only period on a 30-year loan, the loan would still be $500,000, and principal and interest over the remaining 25 years would be about $3,455 a month at the same rate. The buyer chose interest only to keep early cash flow comfortable while the property settled with a tenant. The outcome was a lower repayment for five years, followed by a noticeably higher one, so they planned for that step up from day one. The trade-off is that you owe the full amount at the end of the interest-only period.

This is an illustration only and not a quote. Rates vary by lender and by your circumstances.

What Interest Can You Claim on a Rental Property Loan?

Interest on money borrowed to buy or hold a rental property is generally deductible while the property is rented or available for rent. Only the interest part of a repayment counts, and the principal part does not.

How you use borrowed money also matters. Under ATO Taxation Ruling TR 2000/2, deductibility depends on what each drawdown or redraw is used for. If you pull equity or redraw funds out for a private purpose, such as a holiday, that portion of the interest is not deductible, even though the loan is secured by your rental property.

An offset account lowers the interest charged because interest is worked out on the loan balance less the offset balance. That means your deductible interest is lower too, although you keep more cash in your pocket. Other costs such as council rates, insurance and property management fees are also deductible while the property is rented or available for rent. Please speak with your accountant about how this applies to you.

How Do the New Negative Gearing Rules Affect Buyers?

Negative gearing rules changed on 12 May 2026, and the date you acquire the property now matters. Properties held at 7:30pm AEST on that date, including those under contract awaiting settlement, keep the current treatment, which lets losses offset other income such as wages.

For established homes bought after that time, net rental losses from the 2027-28 income year can only be used against other residential property income, including residential capital gains. Excess losses can be carried forward. Properties bought between that time and 30 June 2027 can use the current rules until 30 June 2027 only. Eligible new builds acquired after 12 May 2026 can still deduct losses against all income.

The rules also affect capital gains tax. From 1 July 2027, the 50 per cent CGT discount for individuals, trusts and partnerships is replaced by cost base indexation using CPI, with a 30 per cent minimum tax rate on real gains accruing from that date where the effective rate would otherwise be lower. For assets held before 1 July 2027, the portion of the gain accruing before that date is taxed under the current rules. Eligible new build residential properties can elect either the 50 per cent discount or indexation with the minimum tax. These changes can alter which property type suits you, so get advice from your accountant before you sign a contract. If you are weighing up a new build, our house and land packages and construction loans pages explain those paths.

Using Equity in Your Home to Fund a Deposit

If you own a home in Launceston, you may be able to use the equity in it as the deposit for a rental property. Lenders usually allow borrowing up to 80 per cent of a property's value without lenders mortgage insurance (LMI), though this is lender policy and not a legal limit.

Lending above 80 per cent generally needs LMI. That is an extra cost paid by you, and it needs approval from both the lender and the insurer. Lenders set their own caps on how much equity they will release.

Consider a homeowner who wants to buy a rental and has enough equity to keep total borrowing at or under 80 per cent of the combined property values. They split the borrowing into a separate loan for the investment, so the interest on the rental loan is easy to separate from their home loan. The outcome is a clean record for tax time, and no LMI to pay. The trade-off is that you now have more debt secured against your own home, so a drop in rent or a rise in rates affects the family home too. Our equity release page covers how this works.

Does Refinancing Help an Existing Investor?

Refinancing means moving your current loan to a different lender or product, and it can help if your loan no longer suits your goals. It can change your rate, your features and your loan structure.

There may be discharge, valuation or other costs to move, and these differ between lenders, so compare them with any saving before you decide. If your fixed rate is ending, our fixed rate expiry page explains your choices, and our refinancing page covers the process.

Why Use a Broker for a Launceston Investment Loan?

A broker can compare investment loan options from the lenders on their panel. Your needs, such as an offset account, interest only or a fixed rate, can then be weighed against the costs of each product.

Our investment loans page outlines how we work with investors, and you can also visit our Launceston team page.

Call one of our team or book an appointment at a time that works for you, and we will talk through your plans for a rental property in Launceston.

Frequently Asked Questions