Loan Application Fees – Are They Tax Deductible? (2026)

When considering a home loan, one question that frequently arises is whether loan application fees are tax deductible. With property prices climbing steadily, every dollar saved matters, and understanding the tax implications of your loan can significantly impact your financial planning. Let's delve into the intricacies of loan application fees and their tax-deductible status, providing you with the clarity you need to make informed decisions.

Understanding Loan Application Fees

Loan application fees, also known as establishment or upfront fees, are charges imposed by lenders to process your loan application. These fees cover administrative costs and vary significantly across lenders, sometimes amounting to hundreds of dollars. In Australia, these fees are typically non-refundable, even if your application is unsuccessful.

It's crucial to differentiate loan application fees from other costs like ongoing fees, discharge fees, or government charges. Understanding this distinction is key to assessing their potential tax deductibility.

Tax Deductibility of Loan Application Fees

When it comes to tax deductibility, the Australian Taxation Office (ATO) has specific guidelines. Loan application fees may be tax deductible if the loan is used for investment purposes, such as purchasing an investment property or shares. However, if the loan is for personal use, such as buying a primary residence, these fees are generally not deductible.

Here is a comparison of typical interest rates for investment versus personal loans in 2026:

Loan Type	Interest Rate Range	Tax Deductibility
Investment Property Loan	6.49% - 8.5%	Potentially deductible
Personal Home Loan	5.0% - 6.0%	Not deductible

For investment loans, the ATO allows you to claim the interest and fees related to the loan as a deduction against your rental income. However, it's important to note that fees must be amortised over the term of the loan or five years, whichever is shorter.

Steps to Determine Tax Deductibility

1. Identify the Purpose of the Loan: Determine if the loan is for investment or personal use. This initial step is critical as it influences the tax treatment of the fees.
2. Consult a Tax Professional: Engage an accountant or tax advisor to assess your eligibility for deductions. They can provide tailored advice based on your financial situation.
3. Keep Detailed Records: Maintain comprehensive records of all loan-related expenses, including application fees. Accurate documentation is essential for substantiating your claims.
4. Amortise the Fees: If eligible, ensure the fees are amortised correctly over the appropriate period to maximise your tax benefits.
5. Review Annually: Regularly review your financial and tax positions to ensure compliance and optimise potential deductions.

Tips and Considerations

• Plan Ahead: Engage with Esteb and Co's extensive panel of 83+ lenders to compare loan options and associated fees before committing to a loan.
• Customise Your Loan Structure: Consider structuring your loan to maximise tax efficiency, particularly if you have both personal and investment loans.
• Stay Informed: Tax laws and lender policies can change. Stay updated with the latest information to ensure your financial strategies remain effective.
• Utilise Expert Guidance: Leverage professional advice to navigate complex tax scenarios and make the most of available deductions.

Frequently Asked Questions

Q1: Are all loan application fees tax deductible if I purchase an investment property?

A1: Generally, yes, but they must be amortised over the loan term or five years, whichever is shorter.

Q2: Can I claim tax deductions on loan application fees for refinancing?

A2: If refinancing an investment property loan, you may be eligible to claim deductions on associated fees.

Q3: What records should I keep for tax deduction purposes?

A3: Maintain detailed records of all loan-related expenses, including receipts and statements, for accurate tax claims.

Q4: How often should I review my tax deductions?

A4: Review your deductions annually or whenever there are significant changes in your financial situation.

Q5: What if my loan is partly for personal use and partly for investment?

A5: You may need to apportion the interest and fees between the two purposes and claim deductions accordingly.

Q6: Do all lenders charge loan application fees?

A6: Not all, but many do. It's important to compare options, as Esteb and Co's panel of lenders offers varying fee structures.

Q7: Can I negotiate loan application fees?

A7: Yes, some lenders may be open to negotiation, especially if you have a strong credit profile or are a repeat customer.