In TaxTank, you have two primary ways to allocate loans to properties, each serving a different purpose depending on how you want to track your equity and manage your tax deductions. While loan allocation directly affects your equity and forecasting graphs, interest can still be apportioned separately based on actual loan usage - even if the loan is allocated to the property it's secured against. This ensures your tax reporting remains accurate and fully ATO-compliant.
Let’s start by looking at how to allocate loans in TaxTank and when each method makes the most sense.
Loan Allocation Options in TaxTank
1. By Security (Property Secured Against the Loan)
When to Use:
You want to track equity and loans based on your actual loan structuring with the bank.
Ideal for understanding your financing position from a lender’s perspective.
Example:
If you have a loan secured against Property A and all funds were used for Property A, this method keeps things simple and mirrors your financing arrangements.
2. By Usage (Apportioning for Tax Purposes)
When to Use:
The loan was used to fund multiple properties.
You want your equity and forecasts to reflect the real distribution of funds.
Crucial for aligning with ATO guidelines, which require interest deductions to be based on how the funds were used—not the property the loan is secured against.
Example:
If a $600,000 loan secured against Property A was used to:
Refinance $200,000 of Property A’s loan, and
Purchase Property B for $400,000
Then you’d allocate 33% of the loan to Property A and 67% to Property B, reflecting the true usage of funds.
To Allocate loans head to Bank feeds and select the three dots on the bank account tile, then the Allocate option from the dropdown. Then simply select the property or properties and the claim percentage.
How to Allocate Loans in TaxTank
Go to Bank Feeds.
Locate the bank account linked to the loan and click the three dots on the account tile.
Select Allocate from the dropdown menu.
Choose the property (or properties) the loan relates to.
Enter the claim percentage for each property based on how the loan was used.
Click Save to apply the allocation.
What About Interest?
Even if you allocate a loan by security (option 1), you can still apportion interest based on usage for tax purposes.
Here’s why:
Under ATO guidelines, interest is deductible based on the purpose of the loan, not the property it's secured against. (Source: ATO – Rental Expenses)
In TaxTank, you can apportion interest in two ways:
Split Function
Set a fixed split for the loan interest (e.g., 30% to Property A, 70% to Property B).Auto-Allocation Rules
Create rules to automatically allocate interest based on keywords, payees, or amounts.
How to Allocate Interest Transactions by Usage
To ensure your loan interest is apportioned correctly for tax purposes, you can create custom bank rules for each property the loan was used for.
Follow these steps:
Go to Bank Feeds and find a recent interest transaction related to the loan.
Click the “Create Rule” button on the transaction, complete the fields to create the rule, ensuring you enter the claim percentage applicable to this property (e.g., 90%), before saving.
Now go to the Bank Rules tab (top right in Bank Feeds).
Click Create New Rule again to repeat the process for your next property, ensuring you enter the remaining claim percentage (e.g., 10%) before saving.
Once your happy with the rules, you can edit them both from the Bank Rules tab and tick the “Apply the rule automatically” to enable auto allocation.
Once both rules are active, TaxTank will automatically allocate interest repayments across your properties each time the conditions are met.
