Investment Property Tax Deductions in Australia: What You Can and Can’t Claim

Investing in property can be a lucrative way to build wealth, but it also comes with various tax implications. Understanding which expenses are tax-deductible for Australian property investors can significantly impact profitability and compliance with the Australian Taxation Office (ATO) regulations.

In this article, we explore the key investment property tax deductions you can claim, as well as those you cannot.

What You Can Claim: Investment Property Tax Deductions

1. Interest on Loans

Interest on loans taken out to purchase, maintain, or improve a rental property is generally tax-deductible. This includes:

• Interest paid on the mortgage.
• Interest on loans for property-related expenses such as renovations.

However, if part of the loan is used for private purposes, only the portion directly related to the rental property is deductible.

2. Rental Advertising Costs

If you advertise your property to attract tenants through online platforms, newspapers, or real estate agencies, these costs are deductible.

3. Property Management Fees

Real estate agent fees for managing the property, including finding tenants, collecting rent, and overseeing maintenance, are fully tax-deductible.

4. Council Rates & Water Charges

Any council rates and water service charges that are paid by the landlord can be claimed as deductions.

5. Land Tax

Land tax is deductible if the property is rented out or genuinely available for rent. 

6. Body Corporate Fees & Strata Levies

If your property is in a strata complex, you can claim body corporate fees that cover shared property maintenance costs, management, and insurance.

7. Repairs & Maintenance

You can claim deductions for immediate repairs that restore an item to its original condition due to wear and tear from renting. Examples include:

• Fixing broken appliances.
• Replacing damaged carpets.
• Repairing leaks or plumbing issues.

Important: Improvements or upgrades, such as installing a new kitchen, are considered capital expenses and must be depreciated over time.

8. Insurance Costs

Landlord insurance, building insurance, and contents insurance (for furnished rentals) are deductible expenses.

9. Depreciation on Assets & Capital Works Deductions

Property investors can claim depreciation on eligible assets such as:

• Furniture, appliances, and carpets(Except those which are acquired second hand with the property purchase)
• Structural improvements and renovations under capital works deductions (e.g., extensions, flooring, and built-in wardrobes). These can be deducted over 25 to 40 years.

A quantity surveyor can prepare a tax depreciation schedule to maximise claims and provide details on the original structure costs which you may claim a capital works deduction for.

10. Professional Services

If you hire an accountant, property advisor, or solicitor to assist with tax-related matters, their fees are tax-deductible.

11. Stationery, Phone, and Internet Costs

Any administrative expenses related to managing the property, such as postage, phone calls, or internet costs, can be claimed however you will need supporting evidence to confirm the portion of the costs that relate specifically to managing the property.

12. Pest Control

If you engage a pest control service for the rental property, the cost is deductible.

13. Gardening & Lawn Maintenance

If your rental property has a garden, expenses for mowing, weeding, and landscaping are tax-deductible.

14. Borrowing Expenses

Loan application fees, mortgage registration fees, and lender’s mortgage insurance (LMI) can be deducted over five years or the loan term (whichever is shorter).

What You Can’t Claim: Non-Deductible Expenses

While there are many deductible expenses, some costs cannot be claimed, including:

1. Purchase Costs

The cost of acquiring a property is not tax-deductible. This includes:

• Stamp duty.
• Legal and conveyancing fees.
• Initial building inspections.
• Buyer’s agent fees.

However, these costs may be factored into the capital gains tax (CGT) calculation when selling the property.

2. Travel Expenses

From 1 July 2017, travel costs related to inspecting, maintaining, or collecting rent for a residential investment property are generally not deductible unless you are carrying on a business of letting rental properties.

3. Renovations & Capital Improvements

Major upgrades, such as adding an extra room, replacing an entire roof, or significant bathroom renovations, cannot be immediately deducted. These costs are still deductible but must be claimed over time under capital works deductions.

4. Expenses Paid by Tenants

If your tenants pay for services or maintenance (e.g., water bills and repairs), you cannot claim these expenses.

5. Private Expenses

Any expense that is not directly related to renting the property, such as:

• Personal use of a rental property.
• Expenses for non-income-generating properties.
• Loan repayments (only the interest portion is deductible).

6. Initial Repairs & Defects

Repairs for issues that existed when you purchased the property (e.g., fixing a leaking roof discovered upon purchase) cannot be immediately claimed. These are considered capital costs.

7. Principal Loan Repayments

While the interest on a loan is deductible, the principal repayment portion is not deductible.

Maximising Your Investment Property Tax Deductions

1. Keep Detailed Records

• Maintain receipts, invoices, and statements for all expenses.
• Use a spreadsheet,  accounting software or hire a professional accountant to help track deductions.

2. Obtain a Depreciation Schedule

A quantity surveyor can assess your property and provide a detailed depreciation report, maximising allowable claims.

3. Seek Professional Advice

Tax laws change frequently, so working with an accountant or tax professional ensures compliance and helps optimise deductions.

Final Thoughts

Understanding what you can and can’t claim on your investment property can significantly impact your tax return and overall profitability. Keeping meticulous records, obtaining a depreciation schedule, and consulting with a tax professional are essential steps to ensure compliance with ATO regulations while maximising deductions.

If you need assistance with your investment property tax strategy, our team at Synergy Accountants is here to help. Contact us today to ensure you’re getting the most from your investment while staying compliant with Australian tax laws.



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