Tax time makes a lot of property investors nervous. But for those who understand the rules, the end of the financial year isn't something to dread - it's one of the best opportunities to improve the returns on your investment. Here's a plain-English breakdown of what you can and can't claim.
The end of the financial year falls on 30 June, and for Australian property investors, it comes with an important question: are you claiming everything you're entitled to?
The Australian Taxation Office (ATO) allows investment property owners to claim a wide range of expenses as deductions - meaning these costs reduce the amount of income you're taxed on. Done properly, this can meaningfully improve your after-tax returns. Done poorly - or not at all - and you're likely leaving money on the table.
The deductions split into two categories: expenses you can claim in the same year you incur them, and expenses you spread out over several years. Understanding the difference is where most beginners get tripped up.
What you can claim immediately
These are costs you can deduct in full in the same financial year you pay them, provided your property was rented or genuinely available for rent during that period. If the property was only partly rented (a holiday home used personally for some of the year, for example), the deductions need to be apportioned.
For most property investors, this is the single biggest deduction on their tax return. On a typical $600,000 investment loan at 6%, that's around $36,000 a year in interest.
So if you paid $36,000 in interest over the financial year, that's $36,000 wiped off your taxable income. For someone in the 37% bracket, that works out to roughly $13,320 less tax.
Council rates, water charges and land tax are deductible in the year you became liable for them. If you receive a back-dated land tax assessment covering prior years, you'll generally need to amend the relevant prior-year tax returns rather than claiming the lot in the current year.
Building, contents, public liability and loss of rent insurance are all deductible in the year you pay them. Most "landlord insurance" policies bundle several of these together.
Fees and commissions paid to your property agent for managing, inspecting and collecting rent are fully deductible. Rates vary by market and agency - ask your property manager for a clear breakdown so you can claim accurately.
Listing fees, online platform charges, agency advertising costs - all deductible in the year you pay them.
The cost of fixing damage or deterioration that happened while the property was earning rent - leaking tap, cracked window, broken air-con unit, damaged flyscreen - is deductible in the year you pay it.
For apartments and townhouses, regular contributions to the body corporate's administrative fund and general-purpose sinking fund (also called strata) are deductible in the year you pay them.
Routine upkeep between or during tenancies is deductible in the year you pay for it. This covers end-of-lease cleans, lawn mowing, gutter clearing, and pest control call-outs.
Fees paid to a registered tax agent or accountant for preparing your tax return - including the portion that relates to your investment property - are deductible. Legal advice is deductible in limited circumstances: evicting a non-paying tenant, taking court action for unpaid rent, or defending a damages claim at your property.
What you claim over time
Some expenses can't be deducted in one hit — they need to be spread over several years.
These are the one-off costs of setting up your investment loan - not the interest itself, which is claimed separately each year. Borrowing expenses include loan establishment fees, Lender's Mortgage Insurance (LMI), title search fees charged by your lender, mortgage broker fees, valuation fees for loan approval, and any stamp duty on the mortgage document (mostly abolished across Australia in recent years, though some states retain it).
The physical structure of a rental property - walls, roof, floors, built-in fittings - wears down over decades, and the ATO lets you claim this as a deduction. For residential buildings where construction started after 15 September 1987, the rate is 2.5% per year over 40 years.
This covers items inside the property that wear out over time: carpet, curtains, dishwashers, air conditioners, hot water systems, furniture and similar fittings. Each item is claimed over its effective useful life rather than all at once.
Items costing $300 or less = write off immediately in year of purchaseThe repair vs improvement trap
This is one of the most common mistakes property investors make, and the ATO pays close attention to it.
A repair restores something to its original working condition - claim it immediately. An improvement makes the property better than it was, or changes its character - claim it as capital works at 2.5% per year over 40 years.
The simplest test is like-for-like. Replacing a broken fence with the same materials is a repair. Replacing a timber fence with a rendered masonry wall is an improvement. Two other situations also tip a job into capital works: replacing something in its entirety (the whole roof, the whole kitchen) rather than fixing part of it, and any work that changes the character of the property.
- Replacing a few cracked roof tiles
- Patching a damaged section of fence
- Fixing a leaking tap or burst pipe
- Repairing a broken oven element
- Repainting walls (same colour) to fix wear
- Replacing a damaged flyscreen
- Fixing rotten timber on a deck
- Replacing a cracked window pane
- Replacing the entire roof
- Replacing the whole fence
- Installing a new bathroom
- Replacing the kitchen with a new layout
- Adding a deck, garage or extra room
- Knocking out a wall to open the floorplan
- Building a granny flat
- Converting a garage into a living space
If a single job involves both repairs and improvements, ask your tradesperson for an itemised invoice up front. Without one, the ATO can treat the whole lot as capital works and you lose the immediate deduction on the repair portion.
Then there are initial repairs - work to fix damage or defects that existed when you bought the property. These can't be claimed as immediate repairs, even if you didn't know about the problem at the time. The deduction isn't lost though: structural work (fences, walls, roofs, ceilings and similar) usually qualifies as capital works and can be claimed at 2.5% per year over 40 years. Anything you don't claim that way is added to the property's cost base for Capital Gains Tax purposes when you eventually sell - which reduces your taxable gain. The catch: if you've claimed it as capital works along the way, you don't also get to count it in the cost base.
What you can't claim
Knowing what's off the table is just as important as knowing what's on it. Some of these costs aren't lost entirely - they're just deferred or claimed through a different pathway. Others can't be claimed at all.
Stamp duty on the property purchase
Treated as a capital expense - not an income-year deduction.
Principal repayments on your loan
Only the interest portion is deductible. Principal is just you paying back what you borrowed.
Travel to inspect your rental property
Has not been deductible for individual investors since 1 July 2017. Companies, large super funds and a few other entity types are still allowed - most retail investors are not.
Your own labour on DIY repairs
You can claim the cost of materials, but not the value of your own time and effort.
Legal fees for buying or selling the property
Treated as capital expenses, not immediately deductible.
Interest on the personal-use portion of your loan
If you've drawn on your investment loan for a car, holiday or anything private, that portion of the interest stops being deductible.
Special body corporate levies for capital improvements
A one-off levy raised to fund a roof replacement, balcony rebuild or similar can't be claimed as an immediate deduction.
Depreciation on second-hand assets in established properties
From 9 May 2017 (the 2017 Budget night), if you buy an established property, you can't claim depreciation on the existing carpet, blinds, appliances, hot water system and so on.
What's changing from 2027 - and why it matters now
This is the most significant policy development for Australian property investors in years. The Federal Government has announced plans to reform both Negative Gearing and Capital Gains Tax, with changes proposed to start on 1 July 2027.
Important first: this is not yet law. It was announced on 12 May 2026 as part of the 2026-27 Federal Budget and still has to pass Parliament. Things can change. But the government has set a fixed cutoff time for grandfathering (7:30pm AEST on Budget night), which means the planning calculus has already shifted for anyone buying property now.
Current rules
If your rental expenses exceed your rental income (a loss), you can offset that loss against your other income - including your salary or wages.
Proposed from 1 July 2027
Restricted to new builds only. For established properties purchased after the cutoff, rental losses can still be claimed against other residential property income and carried forward to future years - but not deducted against wages.
Current rules
A 50% discount on any capital gain for assets held longer than 12 months.
Proposed from 1 July 2027
The 50% discount is replaced with cost base indexation (adjusting your purchase price upward for inflation using CPI before calculating the gain) plus a 30% minimum tax rate on capital gains. Applies to all CGT assets, including shares. New build property investors can choose either the new model or the existing 50% discount.
What it means for you
Bought before 7:30pm AEST, 12 May 2026
Full negative gearing continues for as long as you hold the property - no changes. The 50% Capital Gains Tax discount still applies to all gains accrued up to 1 July 2027. Only the portion of any gain that accrues after that date is calculated under the new rules.
Bought between 12 May 2026 and 30 June 2027 (established property)
You can negatively gear against other income during this window, but only until 30 June 2027. From 1 July 2027 onward, your rental losses are restricted to offsetting other residential property income only. Same Capital Gains Tax split as above - 50% discount for pre-1 July 2027 gains, new rules after.
Bought from 1 July 2027 onward (established property)
No deduction of rental losses against wages or salary. Losses can still offset other residential property income and be carried forward indefinitely. Capital Gains Tax: cost base indexation plus 30% minimum tax rate, with no 50% discount option.
New builds, main residence, affordable housing
New build property investors keep full negative gearing under the current rules and can choose between the 50% Capital Gains Tax discount and the new indexation model at sale. The main residence exemption is unchanged. The 60% Capital Gains Tax discount for qualifying affordable housing is preserved. Small business Capital Gains Tax concessions are unchanged.
