Property Investment Tax Deductions Every Australian Investor Should Know

If you own an investment property in Australia, the ATO allows you to deduct a long list of expenses against your rental income (and against your other income if you're negatively geared). Missing these deductions is leaving real money on the table. Here's the complete checklist.

Deductions you can claim immediately

These are deductible in the financial year you incurred them.

• Interest on the loan (not the principal portion — only interest).
• Loan establishment fees, mortgage insurance, broker fees — amortised over 5 years.
• Council rates and water rates.
• Landlord insurance and building insurance.
• Property management fees and leasing fees.
• Body corporate / strata fees (excluding capital improvement levies).
• Repairs and maintenance (the line between repairs and improvements is critical — see below).
• Pest control, gardening, cleaning between tenants.
• Travel costs for property inspection — limited to one trip a year and with strict ATO conditions; check the latest rules.
• Bookkeeping, accounting and quantity-surveyor fees relating to the property.
• Advertising for tenants.
• Land tax (state-specific).

Depreciation — the biggest deduction most investors under-claim

Two types of depreciation matter:

• Division 43 (capital works): typically 2.5% per year of the construction cost of the building, claimable for 40 years after construction. Applies to most buildings constructed after 1987.
• Division 40 (plant & equipment): depreciation of items like dishwashers, blinds, carpets, hot water systems. Note: since 2017, second-hand items on existing rentals can no longer be depreciated by new owners — only items you install yourself or buy brand-new.

A quantity surveyor's depreciation schedule typically costs $600–$800 and unlocks $5,000–$15,000+ of annual non-cash deductions on most properties. The schedule pays for itself in the first year of claiming.

Repairs vs improvements — get this wrong and you'll lose the deduction

The ATO distinguishes carefully:

• Repairs (deductible immediately): restoring the property to its prior condition — fixing a leak, replacing a broken window pane, patching a fence.
• Improvements (capital, NOT immediately deductible): putting in something new or better — a new kitchen, a new deck, a new air-conditioner. These add to the cost base and depreciate over their effective life.

Capital Gains Tax (CGT) — what to know

CGT applies when you sell. The key concessions:

• 50% CGT discount if held for at least 12 months.
• Costs to acquire (stamp duty, legals) add to the cost base, reducing the taxable gain.
• Improvements (not repairs) add to the cost base.
• Selling costs (agent fees, marketing, legals) reduce the gain.

Strategies to maximise your deductions

• Order a depreciation schedule the year you purchase — most investors don't and lose $10k+ in deductions.
• Pre-pay 12 months of interest in June if you have a tax-spike year (subject to bank approval).
• Time major repairs into the same year as your income peak.
• Track every $20 expense — the small ones add up to thousands.

Our investment property calculator handles the cash-side of the numbers. For after-tax position, layer your marginal tax rate over the calculator's pre-tax annual cash flow and add back depreciation deductions.

Frequently asked questions