Help, built a new house but unable to sell original PPOR —

Hi All

We have built our new house north of Adelaide but have been unable to sell our old house.
We have used a 12 month bridging building loan with the equity of our old house but now time is up and mortgage payments are due.
Old house loan was at $160,000. (valued at $320000)
New home loan is $300,000. (valued $315000)
Total new loan is $460,000
Rent on old house will be around $310 pw so positive geared.
We were going to make regular payments but due to baby number 2 and my wife not able to work we only made small payments.

So we are now having to rent out our old house as we can't afford to make full loan payments for long.
Our Home loan people have advised that as long as the payments are made they are happy to keep the loan as is.  If we reapplied for new loans eg split the loans into an ip and a ppor we would not be able to re gain finaince dur to our income been less than when we applied for the original loan. (Wife only works 2 days instead of 4).

My question is can we still claim interest deduction on the portion of the loan that will be for the IP?
We are looking at two options – One is to keep renting the property out as a long term ip (for the kids) or two is to try and sell in another 12 months to reduce our payments and release funds for further property investing.

Thanks ZXTC