What can I claim as a tax deduction on my investment property?

You can claim a wide range of deductions against your rental income: loan interest (usually the largest deduction), council rates, water rates, landlord insurance, body corporate fees, property management fees, repairs and maintenance, land tax, advertising for tenants, pest control, garden maintenance, cleaning costs, and legal fees. You can also claim non-cash depreciation — capital works (the building structure) at 2.5% p.a. and plant & equipment (fixtures and fittings) under a depreciation schedule. Borrowing costs such as loan establishment fees are spread over 5 years. Keep receipts for everything.

How is rental income taxed in Australia?

Rental income is added to your assessable income and taxed at your marginal tax rate. If your total deductible expenses exceed your rental income, the net loss reduces your taxable income — this is negative gearing. If your rental income exceeds expenses, the net profit is added to your taxable income. You declare rental income and expenses in your tax return each year via a Rental Schedule.

What investment property expenses are tax deductible in 2026?

ATO-approved deductions for the 2025-26 year include: (1) Loan interest on investment borrowings; (2) Council and water rates; (3) Landlord insurance; (4) Body corporate/strata fees; (5) Property management and letting fees; (6) Repairs and maintenance (not capital improvements); (7) Land tax; (8) Depreciation — Div 43 capital works (2.5% p.a. on post-1987 buildings) and Div 40 plant & equipment; (9) Advertising costs; (10) Pest control, cleaning, garden maintenance; (11) Legal fees for tenancy matters; (12) Borrowing costs spread over 5 years; (13) Travel to inspect the property is no longer deductible (removed 2017-18). Always confirm with your accountant.

What is the difference between repairs and capital improvements?

Repairs restore an item to its original condition and are fully deductible in the year incurred. Capital improvements enhance the property beyond its original condition — these must be depreciated over time, not claimed immediately. For example, fixing a leaking tap is a repair (deductible now); replacing a standard kitchen with an upgraded one is a capital improvement (depreciate over time). New items installed to replace existing ones may still qualify as repairs in some cases — your accountant can advise.

Can I claim depreciation on my investment property?

Yes. There are two types: Division 43 (capital works) covers the building structure at 2.5% p.a., available on residential buildings constructed after 17 July 1985. Division 40 (plant and equipment) covers removable fixtures and fittings — carpets, appliances, blinds, hot water systems — depreciated at effective life rates. For properties purchased after 7 May 2017, Div 40 deductions are only available for brand-new assets you installed, not second-hand items that were in the property at purchase. A quantity surveyor's depreciation schedule (typically $400–$800) is usually worth getting.

Do I need a depreciation schedule?

A quantity surveyor's depreciation schedule is not legally required but is highly recommended for any property built after 1985. For new properties, depreciation deductions are substantial — often $5,000–$20,000+ per year for the first few years. For older properties or those purchased after 2017, the benefit may be smaller. The schedule cost ($400–$800) is itself tax deductible. Most accountants recommend getting one before lodging your first rental property tax return.

How do I calculate tax on my investment property?

Step 1: Calculate gross rental income (weekly rent × 52, minus vacancy). Step 2: List all deductible expenses including interest, rates, insurance, management fees, maintenance, depreciation, and other costs. Step 3: Subtract total deductions from gross rental income. Step 4: If the result is negative (a loss), multiply by your marginal tax rate to find your tax refund. If positive, multiply by your marginal tax rate to find the extra tax owed. Our calculator above does all this automatically.

What marginal tax rate should I use?

Use the rate that applies to your highest dollar of income for the 2025-26 year. Australian marginal rates (including Medicare levy) are: 0% (up to $18,200), 18% ($18,201–$45,000), 32% ($45,001–$135,000), 39% ($135,001–$190,000), 47% (above $190,000). Note that a negative gearing loss reduces your taxable income, so your marginal rate determines both your tax bracket and how much benefit you receive. Enter your salary in the calculator and it will auto-select your rate.

Investment Property Tax Calculator Australia 2026

Enter your rental income and expenses to calculate your total tax deductions, net rental position, and estimated tax refund or liability for the 2025-26 financial year.

Rental Income

Weekly Rent

Vacancy (weeks/year)

Typical: 1–3 weeks per year

Other Rental Income

Loan Costs

Annual Loan Interest

Interest portion only, not principal repayments

Borrowing Costs (annual portion)

Loan fees spread over 5 years, e.g. $2,500 total = $500/yr

Operating Expenses

Council Rates

Water Rates

Landlord Insurance

Body Corporate / Strata Fees

Property Management Fees

Repairs & Maintenance

Land Tax

Advertising for Tenants

Pest Control

Garden Maintenance

Cleaning

Legal Fees

Other Expenses

Depreciation

Non-cash deductions — get a quantity surveyor's depreciation schedule to maximise these claims.

Capital Works (Div 43) — Building

Typically 2.5% of construction cost for post-1987 buildings

Plant & Equipment (Div 40) — Fixtures

Carpets, appliances, blinds, etc. (new properties / new assets only for post-May 2017 purchases)

Your Tax Profile

Annual Salary / Other Income

Used to auto-calculate your marginal tax rate

Override Marginal Tax Rate (%)

Leave at 0 to auto-calculate from salary above

Your marginal rate: 32% (auto-calculated from salary)

Estimated Tax Refund

$8,544

per year

Annual Rental Loss (Negative Gearing)

-$26,700

before tax benefit

Total Deductions

$54,200

per year

Effective Weekly Cost

$349

after tax benefit

Income & Deductions Summary

Gross Rental Income$27,500

Total Deductions−$54,200

Net Rental Income / (Loss)-$26,700

Marginal Tax Rate32%

Tax Refund$8,544

Deduction Breakdown

Loan Interest$32,500

Capital Works Depreciation (Div 43)$6,500

Body Corporate Fees$3,000

Council Rates$2,500

Property Management Fees$2,200

Plant & Equipment Depreciation (Div 40)$2,000

Insurance$1,500

Repairs & Maintenance$1,500

Water Rates$800

Other Expenses$500

Garden Maintenance$400

Advertising for Tenants$300

Cleaning$300

Pest Control$200

Want a 10-year cashflow projection?

Our Negative Gearing Calculator models your property's cashflow, capital growth, yield, and tax benefits over 10 years — including loan type (interest-only vs principal & interest) and annual growth assumptions.

Try the Negative Gearing Calculator

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Frequently Asked Questions — Investment Property Tax

Disclaimer

This calculator provides estimates for general information purposes only and does not constitute financial or tax advice. Always consult a qualified accountant or tax professional before making investment decisions.