What Are the Key Tax Deductible Items for Rental Property in Australia? (2026 Update)

Investing in a rental property is a significant financial commitment, but understanding the associated tax benefits can dramatically improve your returns. The Australian Taxation Office (ATO) allows property investors to claim a wide range of expenses incurred in generating rental income. Knowing exactly what you can claim is crucial not just for maximising your refund, but for maintaining compliance and avoiding costly penalties.

Failing to correctly categorise expenses or keep adequate records are major compliance risks, and the ATO actively scrutinises rental property claims. For example, distinguishing between an immediately deductible repair and a capital improvement that must be depreciated over time is a common area of confusion that can have significant financial consequences. This comprehensive guide provides a detailed breakdown of the key tax deductible items for rental property, ensuring you have the most up-to-date information for the 2025-26 financial year, based on current ATO guidelines.

In our day-to-day work at Baron Tax & Accounting, we observe many Brisbane property investors who initially underestimate the record-keeping required to maximise their deductions. What often starts as a simple rental income stream can become complex when renovations are undertaken or when loans are refinanced for mixed purposes. For instance, a client in Brisbane recently undertook a significant bathroom upgrade, and we had to carefully separate the immediately claimable repair costs from the capital improvements to ensure full ATO compliance. This proactive approach is essential for optimising tax outcomes.

1. Mortgage Interest and Loan Repayments

For most property investors, the interest paid on the loan used to purchase, improve, or repair their rental property is the single largest tax deduction available. According to the Australian Taxation Office (ATO), you can claim the interest charged on the portion of your loan that directly relates to your rental property, provided it was available for rent or generating rental income during the financial year. It is a critical distinction that only the interest component is deductible, not the principal repayments which reduce your loan balance. This makes understanding your loan structure fundamental to maximising your annual tax deductions and managing cash flow.

How It Works and ATO Conditions

The ATO’s core principle is that you can only claim deductions for expenses incurred in producing assessable income. Therefore, interest is deductible from the date the property is genuinely available for rent. If a loan has a mixed purpose, for example, if you redraw funds for private use like buying a car, you must apportion the interest. Only the portion relating to the rental property is claimable.

ATO Key Insight: If you take out a loan to purchase both a rental property and a new private home, you must accurately split the loan and claim interest only on the investment portion. The same rule applies if you refinance and increase the loan amount for personal expenses.

Practical Examples

• Standard Investment Loan: You purchase a rental property for $600,000 using a $480,000 loan at a 6% interest rate. The total interest for the year is $28,800, which is fully deductible if the property was tenanted or available for rent for the entire year.

• Mixed-Use Loan: You have a $500,000 investment loan but redraw $50,000 to purchase a new car for personal use. You can now only claim the interest on the remaining $450,000 portion of the loan.

Actionable Tips for Landlords

• Maintain Separate Accounts: If possible, use a separate loan or offset account exclusively for your rental property to avoid mixing funds and complicating interest calculations.

• Request Annual Statements: Your lender can provide an end-of-financial-year statement clearly showing the total interest paid, separate from principal repayments.

• Document Everything: Keep all loan establishment documents, settlement statements, and records of any refinancing or loan variations. These are essential for substantiating your claims.

• Consider Loan Structure: An interest-only loan structure may maximise your deductible interest in the early years of your investment. This is a key strategy often linked to negative gearing, which you can learn more about by exploring the tax benefits of negative gearing in Australia.

2. Property Management Fees and Agent Commissions

Engaging a real estate agent or property management company is a common strategy for landlords seeking to streamline operations. The fees paid for these professional services, which cover tenant selection, rent collection, maintenance coordination, and general property administration, are fully tax deductible. As these costs are directly incurred in the process of generating rental income, they are considered a legitimate operational expense by the Australian Taxation Office (ATO), making them one of the key tax deductible items for rental property investors.

How It Works and ATO Conditions

Any fee directly related to managing your tenanted property can be claimed in the financial year it is paid. This includes ongoing management commissions (typically a percentage of the rent collected) and one-off fees, such as a letting fee or lease preparation fee for sourcing and securing a new tenant. The core ATO principle is that the expense must be for services rendered while the property was available for rent or genuinely earning rental income. You cannot claim fees for services related to a period when the property was used for private purposes.

ATO Key Insight: Be aware of bundled services. If your agent's fees include charges for services not directly related to managing the tenancy, such as providing sales appraisals or financial advice, that portion of the fee may not be deductible as a rental expense.

Practical Examples

• Standard Management Fee: Your property generates $26,000 in annual rent, and your property manager charges a 7.5% commission. The total deductible management fee for the year is $1,950.

• Tenant Placement Costs: Upon a change of tenants, your real estate agent charges a letting fee equivalent to one week's rent ($500) and a marketing fee of $200. Both amounts, totalling $700, are immediately deductible.

Actionable Tips for Landlords

• Request Itemised Invoices: Ensure your agent provides detailed monthly and end-of-financial-year statements that clearly separate management fees, letting fees, and any other charges from the rent collected.

• Review Your Agreement: Your management agreement is a key piece of documentation. It outlines all chargeable fees and confirms the services you are paying for, which is essential evidence for your tax return.

• Keep Meticulous Records: Retain all management agreements, invoices, and bank statements showing payments to the agent. This documentation is crucial to substantiate your claims if the ATO requests a review.

• Negotiate for Multiple Properties: If you own more than one investment property, you may be able to negotiate a lower percentage-based management fee with the same agency, reducing your overall costs.

3. Repairs and Maintenance Costs

Keeping your rental property in good condition is not just smart asset management; it’s also a significant source of tax deductions. Expenses incurred for repairing and maintaining your property are generally 100% tax deductible in the financial year you pay for them. According to the Australian Taxation Office (ATO), this includes the costs of fixing wear and tear or damage that occurs as a result of the property being rented out. The critical distinction is that a repair restores an asset to its original condition, whereas a capital improvement enhances its value or function beyond its initial state.

How It Works and ATO Conditions

The ATO defines repairs as work done to fix deterioration or damage, essentially returning something to its previous working order. Maintenance involves work to prevent deterioration or fix existing damage. A common pitfall for landlords is confusing these immediately deductible costs with capital works or improvements, which must be depreciated over many years. For instance, repainting faded walls is a deductible repair, but building a new deck is a capital improvement.

ATO Key Insight: The cost of repairs to a property before it is first made available for rent (initial repairs) is not deductible. These expenses are treated as capital costs and may be claimed over time as part of the property’s cost base for Capital Gains Tax (CGT) purposes.

Practical Examples

• Deductible Repair: A pipe bursts in the kitchen, and you hire a plumber for $800 to fix it and repair the damaged wall. This entire cost is an immediate deduction as it restores the property to its previous condition.

• Deductible Maintenance: You pay a handyman $400 for an annual service that includes clearing gutters, checking smoke alarms, and adjusting sticking doors. This preventative work is fully deductible.

• Capital Improvement (Not Deductible): The existing roof is functional but old. You decide to replace the entire tin roof with modern Colorbond steel for $20,000. This is an improvement, not a repair, and the cost must be depreciated under capital works (Division 43).

Actionable Tips for Landlords

• Keep Detailed Invoices: Ensure invoices from tradespeople clearly state the work performed, distinguishing between "repair" and "replacement" or "improvement".

• Document Property Condition: Use photos or videos to document the state of the property before and after any significant work. This provides evidence that the work was a repair, not an improvement.

• Log All Maintenance: Maintain a spreadsheet or logbook detailing every maintenance expense, including the date, cost, supplier, and a brief description of the work.

• Separate Major Projects: If a project involves both repairs and improvements, ask the contractor to provide a split invoice itemising the costs for each component. This allows you to claim the repair portion immediately.

4. Depreciation and Capital Works Allowance

Depreciation is a non-cash deduction that allows property investors to claim a portion of the cost of the building's structure and its fixtures and fittings as they age and wear out over time. This is one of the most significant tax-deductible items for rental property owners, as it represents value that is lost without you having to spend money in that financial year. The Australian Taxation Office (ATO) separates this into two categories: Division 43 for capital works (the building's structure) and Division 40 for plant and equipment assets (fixtures and fittings).

How It Works and ATO Conditions

You can claim a capital works deduction for the construction cost of the building, extensions, alterations, or structural improvements. For residential properties, this generally applies to buildings where construction began after 15 September 1987, claimable at a rate of 2.5% per year over 40 years. Plant and equipment assets, such as carpets, ovens, and blinds, have their own effective lives and depreciate at a higher rate. It is important to note that you cannot claim depreciation on assets in a second-hand residential property unless the property was brand new when you purchased it.

ATO Key Insight: The costs of acquiring land, clearing the land prior to construction, and landscaping are not deductible as capital works. These expenses form part of the property's cost base for Capital Gains Tax (CGT) purposes.

Practical Examples

• Capital Works Deduction: A qualifying building has construction costs of $400,000. At a 2.5% rate, you can claim a $10,000 deduction annually for 40 years.

• Plant and Equipment: You install a new air conditioning unit for $5,000. Based on its effective life, you might claim depreciation of $500 in the first year using the diminishing value method.

• Renovations: You purchased a property built in 1995 and spent $60,000 on a new kitchen and bathroom. You can claim capital works and plant and equipment depreciation on the $60,000 renovation cost.

Actionable Tips for Landlords

• Obtain a Depreciation Schedule: Engage a qualified quantity surveyor to prepare a comprehensive depreciation schedule. This report identifies all claimable assets and maximises your deductions legally.

• Update After Renovations: If you undertake significant improvements or add new assets, have your depreciation schedule updated to include these new costs.

• Keep Construction Records: If you built the property or have records from the previous owner, keep all contracts and invoices detailing the construction costs.

• Understand CGT: Claiming depreciation will reduce the cost base of your property, which may increase your capital gains tax liability when you sell. To better understand this, explore our comprehensive guide on creating a depreciation schedule for your investment property.

5. Rates, Taxes, and Insurance Premiums

Ongoing statutory costs such as council rates, land tax, and insurance are fundamental expenses of property ownership and are fully tax deductible when the property is used to generate rental income. These costs are considered directly incurred in the process of earning assessable income, making them claimable from the date the property is genuinely available for rent. This category includes council rates, water rates (excluding tenant usage charges), state-based land taxes, strata levies, and various insurance policies designed to protect your investment.

How It Works and ATO Conditions

The Australian Taxation Office (ATO) allows landlords to claim a deduction for these non-capital, recurring expenses in the financial year they are paid. For example, if you prepay your landlord insurance premium for the upcoming year, you can claim the full amount in the year of payment. It's crucial to distinguish between charges passed on to the tenant (like water consumption) and those that are the owner's responsibility (like service availability charges), as only the latter are deductible for the landlord.

ATO Key Insight: If your property is only available for rent for part of the year, you must apportion these expenses. For instance, if you lived in the property for three months and rented it out for nine months, you can only claim 75% of the total annual council rates and insurance costs.

Practical Examples

• Council and Water Rates: Your annual council rates are $2,800 and your water and sewerage service charges are $600. The full $3,400 is deductible.

• Land Tax: You receive a land tax assessment for your investment property portfolio for $1,200. This amount is fully deductible in the year it is incurred.

• Strata Levies: Your apartment incurs quarterly strata levies of $2,000, which cover administration and sinking fund contributions for general wear and tear. The total annual cost of $8,000 is deductible.

• Landlord Insurance: You pay an annual landlord insurance premium of $1,500, which covers building, contents, public liability, and loss of rent. This is fully deductible.

Actionable Tips for Landlords

• Automate Payments: Set up direct debits for rates and strata levies to ensure you never miss a payment and can easily track expenses through bank statements.

• Keep All Notices: File every council rate notice, water bill, land tax assessment, and strata levy statement. These are your primary evidence for the ATO.

• Review Insurance Annually: Before renewing, compare landlord insurance policies from different providers to ensure you have adequate coverage at a competitive price.

• Separate Strata Components: Be aware that special levies raised by the body corporate for major capital improvements (e.g., installing a new lift) are generally not immediately deductible but may form part of the property's cost base for Capital Gains Tax (CGT) purposes. You can find out more by exploring how land tax is calculated in QLD.

6. Utilities and Body Corporate Charges

For landlords who cover utility costs or own a property within a strata scheme, these ongoing expenses represent a significant and fully deductible category. Body corporate or strata fees, which fund the maintenance and administration of common areas in apartments or townhouse complexes, are direct operational costs. Similarly, if your tenancy agreement includes payment for utilities like electricity, gas, water, or internet, these are considered necessary expenses incurred in earning rental income and are therefore claimable against it.

How It Works and ATO Conditions

The Australian Taxation Office (ATO) allows deductions for expenses directly related to managing and maintaining your rental property. Body corporate fees are inherently linked to the property's operation and are fully deductible in the year they are paid. For utilities, the key condition is that you, the landlord, are responsible for the payment. If the tenant pays for their own usage directly to the provider, you cannot claim it. Any portion of these expenses that relates to your own private use must be excluded.

ATO Key Insight: If your rental is part of a duplex and there is a single water meter, you must use a reasonable basis to apportion the bill. For example, if you occupy one half and rent out the other, you can generally only claim 50% of the total water charges.

Practical Examples

• Apartment with Body Corporate: You own an apartment that is rented out for the entire financial year. Your quarterly body corporate levies are $1,500, totalling $6,000 for the year. The full $6,000 is a deductible expense.

• Furnished Holiday Rental: You own a short-term holiday rental where you provide electricity and internet as part of the package. The annual electricity bill is $2,400 and the internet is $960. You can claim the full $3,360, provided you did not use the property for private holidays during the year.

Actionable Tips for Landlords

• Review Your Levies: Your body corporate statements often itemise funds, including administrative and sinking funds. Both types of levies are generally deductible when paid.

• Separate Utility Accounts: Ensure utility accounts for the rental property are in your name (or your business entity's name) to simplify record-keeping and prove the expense is yours.

• Document Tenancy Agreements: Clearly state in your lease agreement which utilities are covered by the landlord. This documentation supports your claims in the event of an ATO audit.

• Monitor Usage: For landlord-paid utilities, consider installing smart meters or other monitoring systems. Identifying inefficiencies can reduce your outgoing expenses and improve your net rental yield.

7. Advertising and Tenant Finding Costs

Expenses incurred to attract and secure a tenant for your rental property are immediately deductible in the financial year they are paid. These costs are considered a direct expense of generating rental income, covering everything from online listings and professional photography to real estate agent letting fees. As the rental market becomes more competitive, investing in quality advertising is not just a necessity but also a valuable tax deduction, ensuring you can claim back the costs associated with finding the best possible tenant.

How It Works and ATO Conditions

The Australian Taxation Office (ATO) allows you to claim any costs associated with advertising your property for rent. This applies whether you are finding a tenant for the first time or re-letting the property after a previous tenancy ends. The key condition is that the expense must be directly related to making the property available for rent. This includes fees for tenant screening and background checks, as these are part of the process of earning rental income.

ATO Key Insight: The costs of advertising a property for sale are not deductible as an ongoing rental expense. Instead, these marketing costs are considered capital in nature and are factored into the cost base of the property, which reduces your Capital Gains Tax (CGT) when you eventually sell.

Practical Examples

• Online Listings: You pay $350 for a premium listing on Domain.com.au to attract more applicants. This $350 is fully deductible.

• Agent Letting Fee: Your property manager charges a letting fee equivalent to one week’s rent ($600) plus a $500 marketing campaign fee to find a new tenant. The total cost of $1,100 is deductible.

• Professional Media: You hire a photographer for $450 to take professional photos and create a virtual tour to make your listing more appealing. This full amount is a claimable expense.

Actionable Tips for Landlords

• Keep All Invoices: Retain every receipt and invoice from real estate agents, listing platforms, photographers, and tenant screening services.

• Invest in Quality: Professional photography and well-written ad copy can attract higher-quality tenants and reduce vacancy periods, making the deductible expense a worthwhile investment.

• Track Costs Per Tenancy: If you have multiple properties or frequent tenant changes, keep a clear record of advertising costs for each specific property and tenancy period.

• Clarify Agent Fees: Ask your property manager for a clear breakdown of their fees. The initial letting fee and any specific advertising charges are deductible, while the ongoing management fee is claimed separately.

8. Legal and Professional Fees

Engaging professionals like lawyers, conveyancers, and tax accountants is often a necessary part of managing a rental property effectively and ensuring compliance. Fees paid for services directly related to producing your rental income are generally tax deductible. This can include costs for preparing lease agreements, resolving tenant disputes, managing compliance obligations, and obtaining professional advice on tax matters specific to your investment property. These expenses are essential for protecting your legal interests and optimising your financial outcomes.

How It Works and ATO Conditions

The ATO allows you to claim a deduction for professional fees in the year they are incurred, provided the service relates to the management and maintenance of the rental property or the production of rental income. A crucial distinction exists between immediately deductible fees and those that are considered capital expenses. For instance, legal fees associated with purchasing the property (conveyancing) or defending your title to it are capital costs. These are not immediately deductible but instead form part of the property's cost base, which is used to calculate Capital Gains Tax (CGT) when you eventually sell.

ATO Key Insight: Fees for preparing tax returns that include rental schedules are deductible. However, legal costs to evict a non-paying tenant are also deductible as they are incurred in the process of managing the tenancy to produce income.

Practical Examples

• Tax Return Preparation: You pay an accountant $600 to prepare your annual tax return, which includes a detailed rental property schedule. The full $600 is an immediately deductible expense.

• Lease Preparation: A tenant's lease is due for renewal. You pay a property manager or lawyer $350 to prepare the new lease agreement. This fee is fully deductible.

• Capital Expense: You incur $2,500 in conveyancing fees to purchase a new rental property. This amount cannot be claimed as an immediate deduction but is added to the property's cost base for CGT purposes.

Actionable Tips for Landlords

• Request Itemised Invoices: Always ask for detailed invoices that clearly describe the services provided. This helps you distinguish between deductible operational costs and non-deductible capital costs.

• Apportion Mixed-Use Fees: If a professional provides advice on both your rental property and a private matter (e.g., updating your personal will), you must apportion the fee and only claim the rental-related portion.

• Keep Detailed Records: Maintain copies of all invoices, engagement letters, and correspondence with professionals to substantiate your claims in case of an ATO audit.

• Seek Specialised Advice: Using an accountant who specialises in property investment can help you navigate complex rules. Understanding these nuances is a key part of financial management, similar to how sole traders need tailored advice, which you can read about when you find the best accountant for sole traders in Australia.

9. Cleaning, Pest Control, and Garden Maintenance

Maintaining the presentation and liveability of your rental property through regular cleaning, pest control, and gardening is a crucial operating expense. These costs, incurred to keep the property in a suitable condition for tenants, are immediately deductible in the financial year you pay for them. Unlike capital improvements that add new value, these are considered ongoing maintenance expenses necessary for generating rental income. This makes them a straightforward and valuable part of the list of tax deductible items for rental property that landlords can claim.

How It Works and ATO Conditions

The ATO allows deductions for expenses directly related to the upkeep of your property's condition while it is being rented or is genuinely available for rent. This includes payments to professional gardeners, cleaners, or pest controllers. The key principle is that the expense must be for maintenance rather than an improvement. For example, mowing the lawns is a deductible maintenance cost, whereas landscaping a new garden bed is a capital improvement and must be depreciated.

ATO Key Insight: You can only claim these expenses for periods when the property was used to produce income. If you paid for garden maintenance while living in the property yourself, that portion of the cost is not deductible.

Practical Examples

• Routine Services: You engage a company for monthly garden and lawn maintenance at $150 per month, totalling $1,800 for the year. The full $1,800 is tax deductible.

• Annual Pest Control: You pay $450 for an annual termite inspection and general pest spray. This is fully deductible as a preventative maintenance cost.

• End-of-Lease Cleaning: Between tenants, you pay $600 for a bond clean, including professional carpet cleaning and window washing, to prepare the property for the new lease. This is also an immediate deduction.

Actionable Tips for Landlords

• Schedule and Automate: Arrange ongoing service contracts for tasks like lawn mowing or pool cleaning to ensure consistency and simplify record-keeping with regular invoices.

• Keep Detailed Invoices: Ensure all invoices clearly state the service provided, the date, and the cost. Vague receipts are often scrutinised by the ATO.

• Document Property Condition: Take photos or videos of the property's exterior and interior at the start of each tenancy. This helps justify the necessity of cleaning and maintenance expenses.

• Address Pests Proactively: Ensuring your rental property is free from pests is not only about tenant satisfaction but also a deductible expense. For guidance on maintaining a pest-free environment, consider exploring comprehensive pest control solutions.

10. Tenant-Related Expenses and Compliance Costs

The costs associated with finding and managing tenants are essential business expenses and are therefore tax deductible. These outlays, incurred to ensure your property is occupied by reliable tenants and that you meet your legal obligations as a landlord, are considered direct costs of producing rental income. From advertising a vacancy to performing background checks and paying for tenancy database access, these expenses are immediately claimable in the financial year you incur them. Staying compliant with tenancy laws also involves costs, all of which are deductible.

How It Works and ATO Conditions

The Australian Taxation Office (ATO) allows deductions for expenses directly related to managing your tenants and ensuring regulatory compliance. This includes costs for advertising the property for rent, tenant screening services, and fees for preparing and executing a lease agreement. As these are operational expenses, they are claimed in full in the year they are paid. The key is that the expense must be directly tied to the process of renting out the property or maintaining the tenancy.

ATO Key Insight: You can claim the costs of evicting a non-paying tenant, including any court fees or bailiff expenses. These are considered a legitimate expense incurred in the course of managing your rental income activities.

Practical Examples

• Finding a New Tenant: You spend $250 on online advertising, $150 on a tenant screening service (credit and reference checks), and $200 for a property manager to prepare the lease documents. The total of $600 is fully deductible.

• Annual Compliance: You pay an annual registration fee of $150 to access a national tenancy database and $350 for a landlord insurance policy that covers tenant-related risks. Both amounts, totalling $500, are claimable tax deductible items for your rental property.

Actionable Tips for Landlords

• Digitise Records: Keep digital copies of invoices for all advertising, screening services, and lease preparation fees. This makes record-keeping simpler and more secure.

• Document Everything: Maintain a clear paper trail of all tenant applications, screening reports, and communication. This substantiates your expenses and is crucial for compliance.

• Stay Updated: Tenancy laws change. Regularly review your state or territory’s residential tenancies act to ensure your screening and management processes are compliant, as any related costs are deductible.

• Understand Your Insurance: If you have landlord insurance, check the policy to see what it covers. The portion of the premium related to tenant default or damage is a deductible expense. If you operate a short-term rental, your compliance needs might differ, as explained in this guide to Airbnb tax in Australia.

Rental Property Tax Deductions Checklist

Category	Description of Deductible Items	Key ATO Rule
Loan Expenses	Interest charged on the loan used to purchase, repair, or improve the property.	Only the interest component is deductible, not principal repayments. Must be apportioned for any private use.
Management & Admin	Fees paid to a property manager or real estate agent for rent collection, inspections, and tenant management.	Fully deductible in the year incurred.
Repairs & Maintenance	Costs to fix wear and tear or prevent deterioration (e.g., plumbing repairs, repainting, pest control).	Must be a repair (restoring to original condition), not a capital improvement (enhancing value).
Depreciation	Decline in value of the building's structure (capital works) and its fittings (plant & equipment).	Requires a quantity surveyor's report. Rules differ for second-hand assets.
Statutory Costs	Council rates, water service charges (not usage), land tax, and body corporate/strata fees.	Must be apportioned if the property was not available for rent for the full year.
Insurance	Premiums for landlord, building, contents, and public liability insurance policies.	Fully deductible. Pre-paid premiums may also be claimable.
Advertising	Costs to advertise for tenants, including online listings, photography, and agent letting fees.	Deductible. Advertising the property for sale is a capital cost, not a rental expense.
Professional Fees	Fees for tax advice, accounting, and legal services related to the rental (e.g., preparing a lease).	Legal fees for purchasing the property (conveyancing) are capital costs.

Frequently Asked Questions (FAQ)

1. What is the difference between a repair and a capital improvement for my rental property?

A repair restores something to its original function or condition, such as fixing a broken window or a leaking tap. These costs are immediately deductible. A capital improvement, however, enhances the property beyond its original state, such as renovating an entire kitchen or adding a new deck. According to the ATO, improvements are capital expenses and must be depreciated over several years, not claimed as an immediate deduction.

2. Can I claim travel expenses for inspecting my rental property?

The ATO has specific rules for travel expenses. You can claim the cost of travelling to inspect your property, but only if you are in the business of letting rental properties. For most individual investors, travel costs to inspect a residential rental property are generally not deductible. It's essential to check the latest ATO guidelines or seek professional advice on this, as it is a common area of incorrect claims.

3. What records do I need to keep for my rental property expenses?

The ATO requires you to keep records for five years from the date you lodge your tax return. These records must prove your income and all claimed expenses. They should include bank statements, loan documents, contracts, receipts, and invoices from tradespeople, property managers, and other professionals. Digital copies are acceptable and often easier to manage.

4. Are initial repairs on a newly purchased rental property deductible?

No, initial repairs to fix defects that existed when you purchased the property are not immediately deductible. The ATO considers these expenses to be capital in nature. They are added to the property's cost base, which is used to calculate your capital gains or loss when you sell the property in the future.

5. If my property is vacant, can I still claim deductions?

Yes, you can claim expenses for the period your property is vacant, provided it is genuinely available for rent. This means you are actively advertising the property, it is in a liveable condition, and you have a realistic expectation of finding a tenant. You cannot claim deductions for periods when the property is unavailable for rent, such as during extensive renovations or when it is being used for private purposes.

Summary

Navigating the landscape of Australian property investment requires more than just finding the right tenants; it demands a meticulous and strategic approach to managing your finances. The key to maximising your returns and ensuring compliance is understanding the distinction between immediately deductible expenses, like repairs and agent fees, and capital costs that must be depreciated, like improvements.

Key Takeaways:

• Accurate Categorisation is Crucial: Differentiate between immediately deductible repairs and capital improvements that are claimed over time.

• Apportion Expenses Correctly: If a loan or property has mixed private and rental use, you must only claim the portion related to generating rental income.

• Meticulous Record-Keeping is Non-Negotiable: The ATO requires you to keep detailed records (invoices, receipts, bank statements) for five years to substantiate all claims.

• Depreciation is a Powerful Non-Cash Deduction: Engage a quantity surveyor to prepare a depreciation schedule to claim the decline in value of the building and its assets.

By proactively and correctly claiming every entitlement, you not only improve your annual cash flow but also enhance the long-term financial performance of your property portfolio.

Call to Action

Navigating the complexities of property tax deductions can be challenging. For personalised advice tailored to your investment portfolio, it is essential to seek professional guidance.

Baron Tax and Accounting

• Website: https://www.baronaccounting.com

• Email: info@baronaccounting.com

• Phone: +61 1300 087 213

• Whatsapp: 0450468318