What expenses can I claim on my investment property tax return?

You can claim loan interest, council rates, water rates, landlord insurance, body corporate fees, property management fees, repairs and maintenance (not capital improvements), land tax, advertising for tenants, pest control, cleaning, garden maintenance, legal fees for tenant matters, depreciation (capital works and plant & equipment), and borrowing costs spread over 5 years. Keep receipts for everything throughout the year.

Can I claim the full loan interest on my investment property?

Yes — loan interest on money borrowed to purchase an investment property is fully deductible. This is typically the largest deduction for most property investors. If you split the loan or used the loan for mixed purposes (e.g. partly personal), only the investment portion of interest is deductible. You cannot claim principal repayments.

What is the difference between repairs and capital improvements for tax purposes?

Repairs restore the property to its original condition and are fully deductible in the year incurred. Capital improvements enhance or extend the property beyond its original condition — these must be depreciated over time. Replacing a broken tap: repair (deduct now). Installing a brand new kitchen where there was no kitchen: capital improvement (depreciate). Replacing a worn-out kitchen with a similar standard kitchen: arguably a repair, but check with your accountant.

Can I claim travel expenses to inspect my investment property?

No — since 1 July 2017, travel expenses to inspect or maintain your residential rental property are no longer tax deductible for individual investors. This includes flights, accommodation, and car travel. The only exceptions are certain eligible investors (e.g. carrying on a business of letting properties). The rules changed to prevent personal holidays being partially claimed as property inspections.

How does depreciation work for investment properties?

There are two depreciation types: Division 43 (capital works) covers the building structure at 2.5% p.a. for residential properties built after 17 July 1985. Division 40 (plant & equipment) covers removable fixtures — carpets, appliances, blinds, hot water systems. For properties purchased after 7 May 2017, Div 40 is only available for new assets you install — not second-hand items in the property at purchase. Get a quantity surveyor's depreciation schedule to maximise these claims.

How do I claim borrowing costs on my investment property?

Borrowing costs (loan establishment fees, mortgage broker fees, lender mortgage insurance if under 80% LVR) are deductible but must be spread over the lesser of 5 years or the loan term. For example, $3,000 in borrowing costs on a 30-year loan = $600 per year for 5 years. If the loan is paid out early, you can claim the remaining balance in that year.

Can I claim property management fees?

Yes. Property management fees charged by your property manager are fully deductible in the year they are incurred. This typically includes letting fees (finding a tenant), ongoing management fees (usually 7–10% of rent collected), lease renewal fees, and inspection fees. Keep your annual statement from your property manager as it itemises all fees paid.

Investment Property Tax Deductions: Complete List for 2026

A comprehensive, up-to-date list of every tax deduction you can claim on your Australian investment property in the 2025-26 financial year — with ATO rules, typical amounts, and what to watch out for.

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The Golden Rule

To be deductible, an expense must be incurred in producing assessable rental income and must not be capital in nature. Keep records (receipts, statements, invoices) for all expenses for at least 5 years after lodging your return.

Loan & Finance Costs

Loan Interest

$15,000–$50,000+/year

Interest charged on your investment loan. The single largest deduction for most investors.

Note: Principal repayments are NOT deductible. If loan is for mixed purposes, only apportion the investment share.

Borrowing Costs

$500–$3,000+/year (spread over 5 years)

Loan establishment fees, mortgage broker fees, lender mortgage insurance (LMI), title search fees, stamp duty on the mortgage.

Note: Spread over lesser of loan term or 5 years. If total borrowing costs are under $100, claim in full in year 1.

Council & Government Charges

Council Rates

$1,500–$4,000/year

Annual council rates charged by local government.

Water Rates & Usage

$600–$1,500/year

Water supply and usage charges. Only deductible if you (the landlord) pay the bill, not the tenant.

Land Tax

$0–$10,000+/year

State-based tax on investment properties above the land tax threshold. Varies significantly by state.

Note: No land tax on your principal place of residence. Investment properties above threshold are taxable. NSW threshold is $1,075,000 (2025-26).

Insurance

Landlord Insurance

$1,000–$2,500/year

Building and contents insurance for your rental property, including landlord-specific cover (rent default, tenant damage).

Body Corporate & Strata

Body Corporate Fees

$2,000–$12,000+/year

Strata/body corporate levies for apartments and townhouses. Includes admin fund and sinking fund levies.

Note: Admin fund levies are deductible. Sinking fund levies are generally deductible when used for repairs — but capital improvement portions may need to be depreciated.

Property Management

Property Management Fees

7–10% of rent ($2,000–$6,000/year)

Ongoing management fees (typically a % of rent collected), letting fees (finding a tenant), lease renewal fees, routine inspection fees.

Advertising for Tenants

$200–$800/year

Cost of advertising your property on rental platforms (realestate.com.au, Domain) and signboards.

Repairs & Maintenance

Repairs

$500–$5,000+/year

Costs to restore the property to its original condition. Fully deductible in the year paid.

Note: Must be genuinely restoring — not improving. Initial repairs to defects that existed at purchase are generally NOT deductible (they form part of the cost base instead).

Pest Control

$200–$500/year

Termite inspections, pest treatment.

Garden Maintenance

$400–$2,000/year

Lawn mowing, gardening where you maintain the grounds for tenants.

Cleaning

$300–$1,500/year

Professional cleaning between tenancies or routine cleaning.

Depreciation (Non-Cash Deductions)

Capital Works — Division 43

$3,000–$15,000+/year

Depreciation of the building structure at 2.5% of construction cost per year. No cash outlay required.

Note: Only available on buildings constructed after 17 July 1985. Based on the original construction cost (not purchase price). A quantity surveyor can estimate this.

Plant & Equipment — Division 40

$1,000–$8,000+/year (front-loaded)

Depreciation of removable fixtures: carpets, blinds, appliances, hot water system, air conditioning, smoke alarms.

Note: For properties purchased after 7 May 2017, only available on brand-new assets you install — not second-hand items existing in the property at purchase. Still valuable for new builds.

Professional & Legal Fees

Accounting & Tax Agent Fees

$300–$800/year

Tax agent fees for preparing your rental property tax return.

Legal Fees

$0–$2,000+ (as incurred)

Legal costs for eviction proceedings, lease disputes, or debt recovery from tenants.

Note: Legal fees for purchasing the property are NOT deductible — they form part of the cost base.

Repairs vs Capital Improvements — The Critical Distinction

This is one of the most common areas of confusion for property investors. Getting it wrong can mean claiming deductions you're not entitled to, or missing deductions you are.

Repairs — Deduct Now

• Fixing a broken tap or pipe
• Replacing broken tiles
• Repainting faded exterior walls
• Repairing a damaged fence
• Replacing a broken oven (same quality)
• Fixing a leaking roof

Capital Improvements — Depreciate

• Adding a room or extension
• Installing a new kitchen (upgrade)
• Adding air conditioning to a room
• Building a new fence where none existed
• Installing solar panels
• Replacing timber floors with tiles

Initial repairs to defects that existed when you purchased the property are generally NOT deductible — they're considered capital (part of the cost base). Always consult your accountant for borderline cases.

Don't Leave Depreciation on the Table

Depreciation is a non-cash deduction — it increases your tax refund without any actual spending. For a new property, it can add $5,000–$20,000+ to your annual deductions. A quantity surveyor's depreciation schedule costs $400–$800 and is itself tax deductible.

Calculate Your Depreciation Benefit

Frequently Asked Questions

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Disclaimer

This guide is for general information purposes only and does not constitute financial or tax advice. Tax rules change and depend on individual circumstances. Always consult a qualified accountant or registered tax agent before lodging your return.