Turning your home into a rental changes how you use the property. It does not erase the history of its loan. Before moving out, review the borrowing, the capital gains tax position and the cost of holding the property alongside your next home.

1. Trace what the borrowing funded

Gather loan statements, refinance documents and records of redraws. Under ATO ruling TR 2000/2, the use of redrawn funds matters when assessing interest deductions. A loan used for both private and income-producing purposes may require interest apportionment.

For example, if you previously redrew money for a private purchase, making the home available for rent does not automatically make the interest on that private borrowing deductible. Ask your accountant to trace the loan rather than rely on its current balance or the property securing it.

2. Review your main-residence choice

The ATO explains that you may choose to continue treating a former home as your main residence for up to six years while it is used to produce income. During the chosen period, you generally cannot also treat another property as your main residence, apart from limited moving-home overlap.

This is a choice to assess against your circumstances, not a guarantee that every former home can be sold tax-free. Review both properties, dates and eligibility before deciding which treatment to use.

3. Preserve valuation and ownership records

A special market-value rule can apply when a home is first used to produce income, if its conditions are met. It is not an automatic cost-base reset for every rental conversion. Ask whether the rule applies and whether you need a valuation at the relevant date.

Keep purchase and sale records, improvement costs, rental dates, valuations and the history of how the property was occupied. Good records make the eventual calculation easier to support.

4. Test the holding cash flow

Prepare a budget for rent, interest, agent fees, insurance, maintenance, vacancy and other ownership costs. Include your next home's commitments. Ask your advisers which costs may be deductible and when; a tax deduction is not the same as cash arriving to cover a bill.

Before you make it available for rent

  • Has the loan and redraw history been reviewed?
  • What main-residence choices are available?
  • Does the first-income-use valuation rule apply?
  • Are the rental and ownership records complete?
  • Can you hold both properties through a vacancy or unexpected repair?

Does refinancing solve a mixed-purpose loan?

Refinancing alone does not establish that all interest becomes deductible. Have the existing debt's use and proposed refinancing reviewed before changing the loan.

Work through the decision first

Explore property structuring, get the free Before You Buy Structure Pack, or apply for a strategy session to discuss the position.

Official guidance

ATO: TR 2000/2 — interest and redraw facilities · ATO: Treating a former home as your main residence · ATO: Guide to capital gains tax 2025

General information reviewed 16 October 2026. This is not personal tax, financial or legal advice. Obtain advice on the rules applying to your circumstances.