Australia’s interest rates may be at”record low” however it is certainly not true for the 1/3 of all mortgages that are on interest-only.

The cash rate set by the Reserve Bank is indeed at a historic low, but in recent months, rates have risen significantly for borrowers of Investment Loans and those paying interest-only.

Westpac, for example, has jacked up interest rates by 0.7 percentage points for property investors with interest-only loans since last October, which is equal to an extra $2460 a year in costs on a $350,000 mortgage, Rate City says.

The other major banks have also all hiked interest-only rates, raising an important question:

Is it time for investors to ditch interest-only loans for Principal & Interest Loans and start paying down their debt?

Before the recent rate hikes, the argument for only paying interest each month was that it would free up a borrower’s cashflow, which could be invested elsewhere or paid off their principal place of residence. This stratgy would also maximise the tax deduction if the investment property is negatively geared whilst paying down their most expensive debt – the personal mortgage.

However, there’s a BIG QUESTION MARK over whether this strategy still makes sense for property investors now that interest-only loans cost significantly more than others.

Macquarie analyst Victor German crunched the numbers and estimated that someone on the top tax bracket with a $500,000 investment property loan would be about $6000 better off after five years, if they switched from an interest-only loan and started paying back principal Compared to Interest-only with maximise tax deductions.

Overall, the investors who are coming to us are realising it’s not working for them… with the interest rate difference you have a choice of staying on Interest-only and getting charged more interest OR going to Principal and interest and reducing your interest bill – even if sometimes this means a slightly higher monthly repayment the difference ends up in your pocket not the banks

So if you have investment or interest-only loans and want to get some advice call us today on 1300 855 244

18% of Australians have been turned down for a home loan by a financial institution and nearly 1 in 10 have been rejected by a big four bank, according to new research.

This highlights the growing proportion of Australians who are being “locked out” of the financial system.

Furthermore than half of those rejected for a loan at a bank were “unaware” that there was another option available.

People are not qualifying for loans for an array of different reasons; it’s not just because they are self-employed, it could be the type of income that they have. Unfortunately this will continue to grow because the old-style bank policies are not really adapted to the new style of Gen Y economy.

There are the factors that the industry needs to have a really good think about; yes, everyone has to take a calculated risk on the top of borrowings and money that we lend out, but at the same time we cannot be ignorant or oblivious to a change and a shift in the way people work.

There is a growing disconnect between Australians and financial institutions, which is causing many Aussies to fall through the cracks.

Mortgage Brokers play a vital role in helping these people, understanding their whole situation and helping them to find a solution that meets their needs.

There are other solutions then those offered by the Big Banks

Call your Go Mortgage Broker today to get your approval on 1300 855 244

When searching for a mortgage, it’s important to look at all the home loans available to you. This can mean exploring second and third tier lenders so that you have a full scope of your options.

When looking at these smaller institutions the biggest concern seems to be related to their stability and how this might impact you, your house or your home loan. We explore these potential risks by taking a look at the history and impact of lender failures in Australia, along with the considerations of borrowing with a smaller lender.

Investing in property is something many people have on their to-do lists, but actually taking the leap can be difficult.

Before you jump in, there is research you should do and questions you should ask yourself. If you are yet to start investing (or even if you are buying your 10th property,) talking over the following questions with an experienced broker could help set you up for the future and avoid costly mistakes.

1. Why am I investing in property?

Your aim might be to build cash-flow to retire on – If so then your investment strategy may need to be different to someone looking to build equity through capital growth. Having a clear goal in mind before you start will make reaching that goal much easier.

A typical goal for one of our clients may be to achieve a rental income of $100,000 per year. This gives them a clear goal to start working towards.

2. Where is my deposit coming from?

Few of us have a spare home deposit in our savings account – but many of us have access to equity in our own homes (or sometimes investment properties). It can be possible to extract this equity to use as a deposit.

Discussing and creating a strategy with your advisers including your mortgage broker will ensure you take the right steps now to get to your goal in the future. For example, depending on your goals and risk profile, you may use larger deposits and avoid Lenders Mortgage Insurance (LMI). However, if your aim is to secure numerous properties, you may want to use smaller deposits, have the LMI added to your loan amounts and spread your deposit funds further.

3. How much can I borrow?

Every lender will assess your income differently, so there is never a single answer to this question. Your individual circumstances (e.g. buying individually or through a Trust or Company, your duration and type of employment, number of properties owned, amount of rental income and your deposit etc.) will fulfill some lenders’ criteria better than others.

Some banks are much more likely to fund your first purchase than your sixth, and you may also find it difficult to get an approval with the same lender after a few applications. A professional mortgage broker experienced in investing will be able to help you design your lending strategy to help you achieve your goals.

4. What property do I buy?

This also depends on your investment strategy and disposable income. It is important to understand how much money you have to commit per month to achieve your goals for capital growth and cash-flow. For example, you may find a property on a larger block, that has future subdivision potential, but that is currently lower yielding. You could match this with a property that is cash-flow positive in order to keep your portfolio balanced. Buying the wrong property for your circumstances can be a costly mistake, so it’s easier to avoid than to fix.

There are also certain postcodes and property types and sizes that will affect what LVR (Loan to Value Ratio) you can borrow. Even if you have a bank pre-approval for a certain amount, your purchase property may not be acceptable to that lender. It’s important to know what the limitations of your chosen lender are, before looking for your property.

5. What type of loan should I get?

There is always a media commentary on fixed vs variable loans. There are advantages and disadvantages to both. Many of my clients are looking to pay down their owner-occupied loans as quickly as possible. With variable loans you have the option of making extra repayments and redrawing available funds if needed. If you are limited on surplus cash you may prefer the certainty of a fixed rate so you know what your expenses will be and can plan accordingly over that term.

There are also loan options – like offset accounts – that can reduce your interest costs without affecting the long-term tax deductibility of your investment loan. Your broker can help you find the right product & loan structure for your needs.

If suitable for you can also look at interest only feature for your investment loans. This can free up any additional funds to reduce owner-occupied and other non-tax deductible debt. Keeping the cash-flow positive is one of the most important steps to building a large, sustainable portfolio.

6. What is my next step?

Depending on how many properties you plan to accumulate, you may be able to get an investment property revalued after some growth or renovations in order to extract equity for the next purchase.

It’s also important to regularly review your loans and your goals. A product that was the best option for you two years ago may no longer be suitable. As your portfolio appreciates, there may be options that become available that are an improvement on your original loans.

We recently reviewed the portfolio of a client with 19 investment properties and had the rates adjusted, saving him over $22,000 of dollars of interest per year.

Despite what phase of building your property investment portfolio you are at, a knowledgeable, experienced, accredited broker can help you shape your next steps and achieve your property goals. It’s always a good time to look at your existing loans and inspect your options to get you to where you want to be.

Deferring a BAS payment, letting PAYG stack up, or carrying GST arrears into the next quarter can feel like a harmless short-term fix when cash is tight. It’s not a loan, there’s no application, and the ATO isn’t chasing you, yet. But from 1 July 2025, the General Interest Charge (GIC) that the ATO applies to unpaid tax debts is no longer tax-deductible. At a current rate of 11.17% p.a., compounding daily, it’s now one of the most expensive forms of finance available to an Australian business, and unlike a bank loan, there’s no offset.

Add the ATO’s increasingly active enforcement posture, Director Penalty Notices, garnishee orders, and credit bureau disclosures, and the “free overdraft” logic breaks down quickly. This article explains how visible you are to the ATO, what banks report, how a tax debt home loan affects your borrowing power, and what you can do about it.

Does the ATO Check Bank Accounts?

Not in real time, but that doesn’t mean it can’t reconstruct your financial activity with a high degree of accuracy.

The ATO receives data flows from a wide range of sources that, combined, give it a detailed picture of most taxpayers’ finances. Here’s how:

• Annual interest reporting – Every Australian financial institution is required to report interest earned on savings accounts and term deposits each year. This happens automatically, regardless of the amount.
• AUSTRAC threshold transaction reports – Any cash transaction of $10,000 or more triggers an automatic report to AUSTRAC, which shares data with the ATO.
• AUSTRAC international transfer reports – Every international funds transfer, in or out, at any amount, is reported to AUSTRAC and accessible by the ATO.
• Suspicious matter reports – Banks are legally required to flag patterns like structured deposits (e.g. multiple transfers of $9,500 to stay under the $10,000 threshold). This is a known red flag.
• Over 60 data-matching programs – The ATO runs automated programs covering share trades, cryptocurrency, property purchases, rideshare income, online marketplace sales, and merchant card facility receipts.
• Section 353-10 notices – During an audit, the ATO can compel a bank to hand over a full transaction history.

The key point: you don’t need to be audited for the ATO to notice anomalies. Automated data matching flags discrepancies before a human reviews the file. The question of whether the ATO checks bank accounts often misses the bigger picture; it doesn’t need real-time access when it already receives this much data passively.

What Transactions Do Banks Report to the ATO?

There’s often confusion about what banks routinely report versus what surfaces during a home loan application. Both matter.

What banks report automatically:

• Annual interest earned on every savings and term deposit account – mandatory, every financial institution, every year
• Cash transactions of $10,000 or more – reported to AUSTRAC, accessible by the ATO
• International transfers of any amount – reported to AUSTRAC
• Suspicious transaction patterns (structured deposits, unusual activity)
• Business merchant card receipts – total card revenue processed through EFTPOS and online payment facilities

What banks don’t routinely report:

Day-to-day transactions under $10,000 and personal account balances aren’t automatically shared. But there’s an important catch.

When you apply for a home loan, your lender will ask for three to six months of bank statements. At that point, ATO direct debits, active payment plan instalments, and BAS-related outflows become immediately visible to your lender. So even if the ATO and your bank aren’t comparing notes on you today, the home loan application is when everything surfaces, and when a tax debt home loan scenario becomes far more complicated.

Does Tax Debt Affect Home Loan Applications?

Yes, even when the debt is below the ATO’s credit reporting threshold, lenders find it and factor it in. Tax debt affects a home loan in three specific ways.

1. It can reduce your borrowing power

Some Lenders treat ATO payment plan repayments as a fixed monthly liability. A $2,000/month payment plan can reduce borrowing capacity by $200,000 or more, depending on the assessment rate used.

2. It usually declines your application as it shows up in your documents

Every home loan application requires recent Notices of Assessment (for self-employed borrowers) and several months of bank statements. ATO direct debits are impossible to miss, and brokers and lenders know exactly what they’re looking at.

3. It signals risk

An undisclosed or unmanaged tax debt tells a lender that your financial position may be less stable than your income suggests. The logic is straightforward: if the tax obligations weren’t being met, can the mortgage repayments be trusted?

Major banks will usually decline applications where tax debt is present. Specialist and non-bank lenders take a more case-by-case approach; they will often consider applications with an active ATO payment plan, typically up to 80–85% LVR, and in some cases, higher.

If you’re self-employed and navigating this, it’s worth understanding all the options available for home loans for the self-employed – the non-bank lender space is broader than most people realise.

When Does the ATO Report Tax Debt to Credit Bureaus?

The ATO can disclose business tax debt to credit reporting bureaus under the Disclosure of Business Tax Debts regime. Three criteria must all be met:

1. The entity holds an ABN and isn’t an excluded entity
2. At least $100,000 in tax debt is overdue by more than 90 days
3. The entity is not effectively engaging with the ATO – no active payment plan, no objection lodged, no complaint with the Tax Ombudsman

If all three apply, the ATO can disclose to credit bureaus. That listing sits on the credit file for five years. Personal (non-business) tax debts aren’t currently disclosed under this scheme, but they still surface during a home loan application through Notices of Assessment and bank statements.

In the 2023–24 financial year, the ATO disclosed over 36,000 business tax debts to credit reporting bureaus. The critical takeaway: engagement is the carve-out. A business actively managing its debt, even under a payment plan, won’t be disclosed. One that ignores the ATO will be.

Tax Debt Home Loan Options

A tax debt doesn’t automatically mean you can’t borrow. It means you need the right structure and the right lender. Here are the main paths forward.

Refinance to consolidate the ATO debt into your mortgage

If you have sufficient equity, this converts a daily-compounding, non-deductible GIC at 11.17% into a longer-term loan at a substantially lower rate. Specialist lenders can often accommodate up to 85% LVR, including the ATO balance, with some considering 90% case-by-case. A refinance on the Gold Coast through a broker with access to the non-bank market is often the fastest route to a real solution.

Stay on an ATO payment plan and apply with a specialist lender

Major banks tend to decline tax debt scenarios outright. Non-bank lenders assess on merit – your income, equity, payment history, and how actively you’re managing the debt all factor in.

Debt consolidation loan

If equity is limited but the debt is manageable, a standalone consolidation facility may be an option to clear the ATO balance and reduce the complexity of your financial position before applying for a mortgage.

Running the numbers: GIC at 11.17% p.a., compounding daily, and non-deductible, versus a refinanced home loan rate considerably lower. The difference in total cost over 12 to 24 months is significant. Note that whether interest on a loan used to repay an ATO debt is itself tax-deductible depends on the purpose of the original debt – speak with your accountant about your specific situation.

The consistent factor across all lender scenarios: an engaged borrower with a clear plan is far more financeable than one in collections.

How to Fix This Before It Blocks Your Home Loan

Three steps worth taking now, regardless of how far along the issue is.

• Talk to your accountant – Get a clear figure on the current GIC accrual, the breakdown of business versus personal tax obligations, and what a realistic repayment timeline looks like. Going into any lender conversation without this information puts you at a disadvantage.
• Engage with the ATO – Whether that’s a payment plan, a hardship application, or a formal objection, active engagement is what keeps your debt out of the credit bureau disclosure process. The ATO’s own guidance is clear: businesses engaging with them to manage their debt won’t be reported, even above the $100,000 threshold.
• Talk to a mortgage broker who works with specialist lenders – Most major banks won’t touch a tax debt file. The non-bank lending market will, but knowing which lenders, at what LVR, and with what documentation is what a broker brings to the table.

If you’re ready to understand where you stand, our team at GoMC can review your borrowing position with the tax debt factored in and give you a clear picture of what’s possible. Call us on 1300 855 244 or book a free discovery meeting at a time that suits you.

FAQ

Disclaimer: This article is general in nature and does not constitute financial or tax advice. Please speak with a qualified professional about your individual circumstances.

Customers with interest-only loans are likely to be charged an even higher premium by banks compared with those who are also paying back principal.

Interest-only loans are the prime targets of a crackdown by regulators intent on cooling the mortgage market.

In March the Australian Prudential Regulation Authority – APRA – ordered banks to lower the proportion of new interest-only lending to 30 per cent; and since then banks have invreased the cost of interest-only loans by up to 0.56%.

Close watchers of the home loan market believe this gap is only likely to widen further in the future, as growth-hungry banks try to convince more customers to pay off principal on their loan, giving lenders more room to expand their interest-only lending without falling foul of APRA’s cap.

If APRA continues to apply pressure on the banks and brings other lenders under its control, the average gap is likely to grow by 0.20-0.40% more

Interest-only loans typically revert to being principal and interest loans after about five years.

Significantly, owner-occupiers who are paying principal and interest are benefiting from greater competition among banks to secure their business in this environment.

So where are you at? What is the best option for you?

Interest Only or P&I? Or should you consider fixing your rate?

Give us a call on 1300 855 244 or Send us an Enquiry and find out

There are around 9.6 million dwellings in Australia and at any time there are about 250,000 properties for sale.

But not all properties make good investments!

In fact, less than 2% of the properties on the market currently are “investment grade.”

Of course, any property can become an investment property.

Just move the owner out, put in a tenant and it’s an investment, but that doesn’t make it “investment grade”.

WHAT MAKES A GOOD INVESTMENT?

Things to look for in any investment are:

• strong, stable rates of capital appreciation;
• steady cash flow;
• liquidity – the ability to take my money out by either selling or borrowing against my investment;
• easy management;
• a hedge against inflation; and
• good tax benefits.

SO HOW DO YOU MAKE MONEY FROM AN INVESTMENT?

Well…property investors make their money in four ways:

1. Capital growth – as the property appreciates in value over time
2. Rental returns – the cash flow you get from your tenant
3. Accelerated or forced growth – this is capital growth you “manufacture” by adding value through renovations or development, and
4. Tax benefits – things like negative gearing or depreciation allowances.

Note that Capital Growth is the most important factor of all.

WHY DO MOST PROPERTY INVESTORS FAIL?

They never achieve the financial freedom they aspire to and this is, in part, due to the fact that they follow the wrong strategy – many chase cash flow.

Now , of course, cash flow is the ultimate aim goal. But it can only be once you’ve built a sufficiently large asset base of “investment grade” properties, meaning your investment journey will comprise three stages:

1. The Accumulation Stage – when build your asset base (net worth) through capital growth of well-located properties. You can speed up your wealth accumulation through leverage, compounding, time and “manufacturing” capital growth through renovations or development. You then move on to the…
2. Transition Stage – once you have a sufficiently large asset base you slowly lower your loan to value ratios so you can progress to the…
3. Cash Flow Stage – when you can live off your property portfolio.

The safest way through this journey, which will obviously take a number of property cycles, is to ensure you only buy properties that will outperform the market averages with regards to capital growth.

NOT ALL PROPERTIES ARE “INVESTMENT GRADE.”

So less than 2% of properties on the market are investment grade.

While there are a lot of properties built specifically built for the investor market – think the many high rise new developments that are littering our cities – most of these are not “investment grade.”

Some would call these properties “investment stock” – they are what the property marketers and developers sell in bulk to naïve investors, but they are not “investment grade” because they have little owner occupier appeal, they lack scarcity, they are usually bought at a premium and there is no opportunity to add value.

ON THE OTHER HAND, INVESTMENT GRADE PROPERTIES:

• Appeal to a wide range of affluent owner occupiers
• Are in the right location. By this I don’t just mean the right suburb –one with multiple drivers of capital growth – but they’re a short walking distance to lifestyle amenities such as cafes, shops, restaurants and parks. And they’re close to public transport – a factor that will become more important in the future as our population grows, our roads become more congested and people will want to reduce commuting time.
• Have street appeal as well as a favourable aspect or good views.
• Offer security – by being located in the right suburbs as well as having security features such as gates, intercoms and alarms.
• Offer secure off street car parking.
• Have the potential to add value through renovations.
• Have a high land to asset ratio – this is different to a large amount of land. I’d rather own a sixth of a block of land under my apartment building in a good inner suburb, than a large block of land in regional Australia.

The bottom line is buying the right ‘investment grade’ property is all about following a proven blueprint that successful investors follow.

This increases your chance of better financial returns and reduce your risks of getting caught out as our property markets move into the next, less buoyant stage of the property cycle.

HOW DO YOU KNOW WHICH STEP TO TAKE NEXT?

Get in touch and we can help get started

The Australian dream of property is still a reality, but the idea of the “dream home” is being redefined as people wish to live closer to cities.

The younger generations are still entering the property market, however it’s looking quite differently than it did for previous generations

The data shows that 68 per cent of buyers bought a home, with 15 per cent buying an apartment or townhouse and 16 per cent buying land on which to buy a home.

The idea of the home they are buying to fulfil that Australian dream has changed.

The Australian dream of property is still a reality, but the idea of the “dream home” is being redefined as people wish to live closer to cities.

It is a redefined dream for the new generations

So, with the Baby Boomers and their picture of the Australian dream it was that quarter acre block, a standalone house with enough room in the backyard to have a makeshift cricket pitch. Whereas it’s being redefined now.

The younger generations are still entering the property market, however it’s looking quite differently than it did for previous generations in terms of what they are buying. It’s smaller block sizes, there’s an increase in medium and high-density housing. So in that respect, what they are getting as they enter the market is looking quite different.

The average age of a first home buyer is 32 years – and that those aged between 25 and 34 made up the highest proportion of first home buyers.

What we can see is that it is still a desire for the younger generations and they are resilient and determined and committed to finding a way to own property.

As Mortgage Brokers we can help facilitate that for the emerging generations and help find solutions to overcome the obstacles and to respond to the new realities… We can help young people get that first foot in the market, which they want to do.

First-home buyers are among the big winners in the Queensland state budget, after it was announced the $20,000 First Home Owner’s Grant would be extended.

The grant, which was set to expire at the end of this month, will be extended for another six months until December 31.

It offers first-home buyers $20,000 to purchase new houses, units or townhouses valued at less than $750,000.

Treasurer Peter Curtis said extending the grant would further drive construction and economic activity.

“The Palaszczuk Government recognises how difficult it is for first-home buyers to get into the housing market,” he said.

“This is one of the most effective ways of helping families to get a start with a new home while simultaneously creating construction jobs and spurring on the economy.

If all the approved grants leverage new dwellings of $750,000 they would represent almost $3.7 billion worth of activity. Queensland’s established housing market is looking healthy, which is encouraging for homeowners across the state.”

If you need some help to get into your own home Enquire Now