Is LMI Tax Deductible?

Which LMI costs can investors claim?

The ATO lists lender's mortgage insurance, "insurance taken out by the lender and billed to you", as a borrowing expense you can claim on a rental property loan.

The ATO's list names stamp duty on the mortgage, which is a different tax from the duty some states charge on your LMI premium. Ask your tax agent how to treat the duty on your premium.

LMI is not mortgage protection insurance

Premiums for insurance that pays out your loan if you die, become disabled or become unemployed are a private expense, so the ATO does not treat them as borrowing expenses. LMI is different: it protects the lender, not you, and is usually charged once when you borrow more than 80% of the value. Read what LMI is.

How do you claim LMI on an investment property?

Add the LMI to your other borrowing expenses, then claim the total over five years from the day you took out the loan, or over the loan term if that is shorter, with a part-year share in the first year.

1. Total your borrowing expenses, including LMI. If the total is $100 or less, it is all deductible in the year you incur it. With LMI in the total that will rarely apply: QBE's minimum premium alone is $1,150. See how much LMI costs.
2. Count two numbers of days: the days you had the loan in the first income year (to 30 June), and the days in the five-year period from the loan date (1,826 if it includes a 29 February, 1,825 if not).
3. First-year deduction: the total × (days you had the loan in the income year ÷ days in the five-year period).
4. Each later year: the amount not yet claimed × (days in that income year ÷ days left in the five-year period).
5. If part of the loan is private, multiply each year's figure by (rental property loan ÷ total amount borrowed).

The ATO's Deductible borrowing expenses calculator, a spreadsheet, does the same arithmetic.

Worked example: a five-year LMI deduction schedule

A loan taken out on 1 October 2026 is claimed across six income years, because its five-year period runs to 30 September 2031. The scenario: an $800,000 investment property in NSW, a 10% deposit and a $720,000 loan over 30 years, the whole loan used for the rental, no other borrowing expenses. We use LMI of $14,400, the typical figure lenders publish at 90% LVR. No lender publishes an investor example, and NSW charges no duty on LMI.

Method from the ATO's worked examples (page last updated 22 May 2026). The LMI figure is an estimate built from lender-published examples checked 29 September 2026, not a quote.

If part of the loan is private

You can claim only the share of LMI that matches the rental part of the loan. The ATO's formula:

Borrowing expenses × (number of relevant days in income year ÷ number of days in the 5-year period) × (amount of rental property loan ÷ total amount borrowed) = deduction for the year

In the ATO's example, Fiona and Max borrowed $209,000: $170,000 for a rental and $39,000 for a car. They claim $170,000 ÷ $209,000 of their borrowing expenses each year.

If you repay or refinance early

If you repay the loan before the five years are up, you claim the unclaimed balance in the year you repay it (ATO). A refinance that pays out your old loan counts, so any LMI you have not yet claimed on the old loan is claimed that year. New LMI on the new loan is a new borrowing expense: you spread it over five years, or the new loan term if shorter, from the new loan date, for the part of the loan used for your rental.

Can owner-occupiers claim LMI?

No. LMI on a loan for the home you live in is not deductible: the ATO's borrowing expense rules cover loans that produce rental income, and exclude any part of a loan used for private purposes. Section 25-25 of the Income Tax Assessment Act 1997 allows the deduction only to the extent you use the money to earn assessable income.

The ATO page does not mention owner-occupier LMI by name; this answer follows from its private-purpose rule, so check your situation with a registered tax agent.

If the property is also your holiday home, borrowing expenses are an ownership cost you can claim only if you used the property, or held it for use, mainly to earn rental income.

If your home later becomes a rental, the five-year period still starts on the day you took out the loan. Tax law lets you claim each year's share only for the time the loan is used to earn rent, so the share for the time you lived there can't be claimed, and nothing is left once five years have passed.

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