Claim Loan Repayments? Here's How to Save Big (2026)

When it comes to managing personal finances, understanding what you can and cannot claim on your taxes can be a game-changer. For many Australians, loan repayments are a significant part of their financial commitments, and the question arises: can you claim loan repayments on your taxes? Let's delve into this topic to provide clarity and guidance, helping you navigate the often complex financial landscape with confidence.

Understanding Loan Repayments and Tax Deductions

Loan repayments are typically a personal expense, and as such, they are not directly tax-deductible. However, there are scenarios where the interest component of your loan repayments can be claimed as a tax deduction. This usually applies to loans taken for investment purposes, such as rental properties or business ventures. It's crucial to distinguish between the principal repayment and the interest, as only the latter might be eligible for deductions.

Current Tax Deduction Options and Rates

In 2026, interest rates in Australia range between 6.49% and 12% depending on the lender and the borrower's creditworthiness. With more than 83 lenders on the Esteb and Co panel, borrowers have a wide array of options. For those with investment loans, the Australian Taxation Office (ATO) allows the interest on these loans to be deductible, provided the loan is used to generate assessable income.

To claim these deductions, you must meet specific criteria:

• The loan must be used to purchase an income-generating asset, like an investment property.
• The income generated from the asset must be taxable.
• Loan interest must be directly related to the income-producing activity.

Here's a quick comparison of various loan types and their tax implications:

Steps to Claim Deductible Loan Interest

Claiming interest on your taxes requires careful documentation and a clear understanding of your financial situation. Here’s a step-by-step guide to help you through the process:

1. Identify Eligible Loans: Review your loans to determine which ones are used for income-generating purposes.
2. Separate Interest from Principal: Obtain detailed loan statements showing the breakdown of principal and interest payments.
3. Maintain Transparency: Keep records of all receipts and financial documents related to the income-generating activity.
4. Consult with a Tax Professional: Before lodging your tax return, consult with a tax advisor to ensure compliance with ATO regulations.
5. File Your Tax Return: Report the deductible interest in your tax return under the relevant section for deductions.

Expert Tips and Considerations

As a borrower, it’s important to be strategic about your loan repayments and tax deductions. Here are some expert tips to consider:

• Consolidate and Refinance: Consider consolidating high-interest loans into a single loan with a lower interest rate. Esteb and Co can help you explore options across our 83+ lenders.
• Plan for Interest Rate Changes: Stay informed about market trends, as interest rates can fluctuate, impacting your repayment amounts.
• Review Your Financial Goals: Regularly assess whether your loans are aligned with your financial objectives and make adjustments as needed.
• Utilise Offsets and Redraws: Use offset accounts to reduce interest or redraw facilities to manage cash flow effectively.

Frequently Asked Questions

1. Can I claim the principal portion of my loan repayments?

   No, only the interest portion of loans used for income-generating purposes can be claimed.

2. Are there any tax benefits for home loans?

   Home loans for personal residences do not offer tax-deductible interest. However, there may be other government incentives available.

3. Can interest on a personal loan be tax-deductible?

   Generally no, unless the loan is used for investment or business purposes.

4. What documentation do I need to claim interest on my taxes?

   You will need detailed statements from your lender showing the interest paid, and evidence that the loan is used for income-producing purposes.

5. How can Esteb and Co assist with my loan needs?

   With access to 83+ lenders, Esteb and Co can help you find competitive loan options that suit your financial and tax needs.