EOFY: when everyone’s trying to claim their dog as a guard animal and debating if that monitor was really used for work.
But savvy property investors? They’re doing something a little more strategic (and way more legit): prepaying 12 months of interest on their investment loans before June 30.
It’s a move that can lead to a lower interest rate and a potentially juicy tax deduction. For some, that means claiming $50K–$60K worth of interest in one hit — and turning that into a much fatter tax refund.
Let’s break it down (no tax degree required).
The strategy: Interest in advance
If you’ve got an investment loan, most major lenders offer what’s called Interest in Advance (IOA).
It means you can:
- Prepay the next 12 months of interest before June 30
- Lock in a discounted fixed rate for that 12 months
- Potentially claim the whole amount as a deduction this financial year
It’s not a loophole — it’s a legit, ATO-compliant move based on the cash basis deduction rule. If you’ve paid the interest, and the loan’s for an income-producing property, you can generally claim it.
The numbers
Say you’ve got a $1,000,000 investment loan on interest-only repayments.
- Variable rate: 6.39%
- Interest in advance rate: 5.69%
- Interest paid monthly: $63,900 p.a.
- Interest paid in advance: $56,900
That’s a $7,000 saving on interest.
But here’s the kicker: if you prepay the $56,900 before June 30, and it’s deductible, you could be getting a bigger tax refund this year — especially if you’re on a high income.
And that $56,900 could be claimed this tax year — if paid before June 30.
Why would anyone do this?
Because if you’ve had a big income year — bonuses, commissions, extra rental income — bringing forward that deduction can reduce your taxable income right now.
And if you’ve got surplus cash sitting around (ahem positively geared property? Share dividends? Sold your jet ski?) — this is a way to put that money to work instead of sitting idle.
Plus, locking in a lower interest rate = peace of mind for the next 12 months.
Is it right for you?
It might be — if:
- You’ve got a surplus cash buffer
- You’ve had a higher-than-usual income year
- You own an investment property on an IO loan
- You don’t mind locking in a 12-month rate
- You’ve got an accountant who gives the green light
This strategy isn’t super common — not because it doesn’t work, but because not everyone has tens of thousands of dollars sitting around at tax time. But if you do, this is one of the sharpest tools in the shed.
Things to watch
Only works on investment loans — your owner-occupied home doesn’t count
Must be an actual prepayment — not just sitting in redraw or offset
Cash basis deduction — the payment has to go through before June 30
You’re locked into that rate for 12 months — so make sure you’re happy with it
Check the fine print — some loans don’t allow this, or have quirky conditions
Talk to your broker and accountant first — and make sure the lender processes the payment in time (don’t leave it until June 29 at 4:58pm).
Wrapping up
This isn’t a loophole. It’s not risky. It’s not even new. But it’s wildly underused.
If you’ve got the spare cash, the right kind of loan, and the tax bill to match — prepaying interest before June 30 can:
- Slash your interest costs
- Potentially boost your tax refund
- Smooth out cash flow for the next 12 months
If you’re not sure whether it works in your situation, we’ll happily do the math and tell it to you straight.
Want to know if this could save you thousands?
Request a Free 30-Minute Finance Strategy Session before the EOFY bell rings.
You’ve still got time to do something your future self — and your accountant — will high-five you for.
This no-obligation free session is held with one of our experienced mortgage brokers. It’s not a sales pitch—just real, strategic advice tailored to your situation, so you can make smarter financial decisions.
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Trilogy Funding Two is a corporate credit representative (Representative Number 506131) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237)
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).