Property Investment Tax Deductions Australia (2026)

Overview

Australian property investors can claim a wide range of tax deductions on their rental properties. Understanding what you can and cannot claim is essential for maximising your after-tax return.

Immediately Deductible Expenses

These expenses can be claimed in full in the year they are incurred:

• Loan interest — the largest deduction for most investors
• Council rates — annual local government charges
• Water rates — supply and usage charges
• Insurance — landlord, building, and contents insurance
• Property management fees — typically 5-10% of rent
• Maintenance and repairs — fixing existing issues (not improvements)
• Body corporate/strata fees — for units and apartments
• Land tax — annual state/territory tax (except NT)
• Advertising for tenants — listing fees
• Travel to property — limited since 2017 changes

Depreciation Deductions

Depreciation is a non-cash deduction — you claim the declining value of assets without spending money.

Capital Works (Division 43)

• Building structure: 2.5% per year over 40 years
• Applies to properties built after 1985
• Get a quantity surveyor's report ($400-$700)

Plant & Equipment (Division 40)

• Fixtures and fittings: carpets, blinds, hot water systems, air conditioning
• Various depreciation rates per asset type
• Since 2017: only available to original purchaser for second-hand items

What You Cannot Claim

• Purchase costs (stamp duty, legal fees) — these are capital costs added to your cost base
• Principal loan repayments — only interest is deductible
• Improvements and renovations — these are capital works, depreciated over time
• Personal use periods — deductions must be apportioned if the property is partially private

Common Mistakes

1. Not getting a depreciation schedule — this can be worth $5,000-$10,000+ per year in deductions
2. Claiming capital improvements as repairs — the ATO distinguishes between repairs (deductible) and improvements (depreciated)
3. Not apportioning shared expenses — utilities, internet, etc. must be apportioned if partially private
4. Missing land tax deductions — an often-overlooked annual deduction

Useful Calculators

• Negative Gearing Calculator — model your tax position
• Investment Property Yield Calculator — see your net yield and cash flow
• Land Tax Calculator — estimate annual land tax by state

Model your investment tax position: Negative Gearing Calculator.