Rental Property Tax Deductions

Often, a rental property is expensive to maintain and it is important that you claim all eligible property expenses to increase your tax refund. When the expenses on your rental property are more than your rental income, your property is negatively geared for tax purposes. If your loan interest payments and other expenses on your investment property are greater than the rental income you receive from tenants, you can claim the loss you incur on the rental property as a tax deduction.
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Rental Property Deductions

Immediate Deductions

All rental property operational expenses are immediately deductible in the year they were incurred. This includes council rates, land tax, repairs, pest control, gardening and mortgage interest.

Depreciation

The cost of a capital item for your rental property (e.g. carpet, air conditioner) is claimed across the item’s “effective life”. The ATO considers effective life as the length of time an item will be usable.

Did You Buy It Yourself?

You can claim depreciation for items that you have purchased for your rental property. You can also claim depreciation for existing items in a rental property if purchased before 10 May 2017.

Items Less Than $300

For capital Items purchased for a rental property that cost below $300 (e.g. ceiling fan or bathroom mirror ) the full amount can be claimed as a deduction in the same tax year.

Borrowing Expenses

When you purchase your rental property borrowing expenses are claimed as a rental property tax deduction. These borrowing costs can be claimed over a five year period.

Claimed Over Time

The cost of your rental property building and renovations and new capital works (e.g. a new roof or driveway) are claimed over the efffective life of the capital works.

Initial Repairs

Initial repairs or improvements made to a rental property after purchase, but prior to renting, are also a deductible expense over the effective life of the repair.

Available For Rent

It’s important to note that you can only claim rental property tax deductions for the period of the year that the property was tenanted, or actively advertised as available for rent.

Expenses immediately deductible

  • Advertising fees
  • Management fee
  • Quantity surveyor fees
  • Body corporate fees
  • Council rates
  • Water rates
  • Gas and electricity bills
  • Land tax
  • Insurance
  • Interest on loans
  • Property maintenance
  • Property repairs
  • Garden maintenance
  • Pool maintenance
  • Servicing costs
  • Cleaning
  • Pest control
  • Stationery
  • Postage
  • Telephone calls
  • Internet access
  • Bookkeeping costs
  • Tax agent and accounting fees
  • Insurance payments
  • Some legal expenses (i.e. related to evicting tenants) N7

Expenses deductible over time

  • Stamp duty on loans
  • Loan set up fees
  • Fees for title searches
  • Solicitor fees related to loans
  • Broker fees
  • Valuation fees
  • Mortgage insurance
  • Depreciation of capital items over $300 (washing machines etc.) only if purchased by you
  • Capital Works (improvements or additions to the property – kitchen renovation, new gazebo etc.)
  • Claim these amounts when you sell the property:
  • Sale and purchase amounts (as per Settlement Statements)
    Legal costs for purchase and sale (including property stamp duty)
  • Building inspections (prior to purchase)
  • Building additions since purchase
  • Initial repairs
Investment Property Depreciation Schedule Details