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The test for deductibility is the nexus between the expense and the assessable income that flows from it. I think paying lmi and parking the extra funds in a savings account doesnt cut the mustard

I'm actually the opposite to you. Lawyer --> Broker lol

Well according to the Genworth website: http://www.genworth.com.au/homebuyer-centre/homebuyer-tools/lmi-premium-estimator/ Option A LMI: $3,213 + $2,652 = $5,865 Option B LMI: $10,176 But Option B wouldn't happen because there's 2 properties - not 1

It could be if he has another property to provide as security. I don't know what his portfolio has.

Cross collateralising isn't always a bad thing - if it saves you thousands in LMI and gives you greater flexibility and greater gearing

It might legitimate but it's not 100% clean... As Terryw said it's a little strange why you wouldn't finance the entire IP and PPor on one loan in the future to possibly save on LMI and avoid paying so much upfront