No, you cannot increase your tax-deductible loan by using equity from your investment property to reduce your home loan. This is because you are essentially swapping security rather than creating a new deductible loan. The ATO determines tax deductibility based on the purpose of the borrowed funds, and repaying a home loan is considered a private expense.

Example:

Let’s say you own Property A, which is an investment property, and Property B, which is your home. You decide to refinance Property A to access equity and use those funds to pay down the mortgage on Property B. While the new loan on Property A is secured against an investment property, the funds are being used for a private purpose (paying off your home loan). Because of this, the interest on the refinanced loan would not be tax-deductible.

If you are considering refinancing or restructuring your loans, we recommend seeking professional advice from Investax Property Tax Specilists to ensure you maximise tax benefits while staying compliant with ATO regulations. Feel free to reach out to us for guidance.