Hi All, I'm a new member on this forum and only a newbie in the investment world. I know that a lot of members on this forum are very knowledgeable and would appreciate some feedback on how to make the best of our current situation. 2009 - Bought Property A - PPOR - LVR $200K Until 05/2013 - Had paid back $80K on Property A (loan balance was $120K) 05/2013 - Re-financed Property A - still PPOR - LVR back up to $200K 06/2013 - Bought Property B - new PPOR - LVR $500K (Used the $80K for from Property A's re-finance for deposit for Property B) 06/2013 - Property A is now an IP (after we settled and moved into Property B) 05/2014 - Bought Property C - IP - Purchase price $400K and LVR 90% Now we went to do the tax return recently and we were being told that tax deduction (Property A) can only be claimed on $120K. It came as a shock but I've done some reading on the forum and this question has been asked a few times before and I understand that I cannot claim tax deduction on $200K. But my main question is, as we bought another IP this year for which we paid $40K + $14K approx. stamp duty. Can we actually claim tax deduction for the interest paid on Property A for $174K? ($120K = Property A's original loan and $54K to buy our second IP this year). The only issue is there's a good 11 month gap and the ATO can obviously ask where was the money for 11 months. So, I'd appreciate some suggestions on how to best handle this if I have any options at all other than biting the bullet and just claim tax deduction for interest paid on $120K for Property A Thanks everyone for your time.