Investment property tax deductions: what you can claim

If you own a rental property, you can claim deductions for many of the costs of earning rent. Getting them right can make a real difference to your tax, but rental deductions are also an area the ATO watches closely, so good records matter.

Expenses you can usually claim in the same year

• Interest on the loan used to buy the property (but not the principal you repay)
• Council rates, water charges and land tax
• Strata or body corporate levies for day-to-day running costs
• Landlord and building insurance
• Property management fees and advertising for tenants
• Repairs and maintenance that fix damage or wear from renting it out
• Pest control, gardening and cleaning while the property is rented
• Bank fees on the loan and accounting fees for your rental

Claimed over time: depreciation and capital works

• Capital works: the cost of building the home, and structural improvements, can generally be claimed at 2.5% a year over 40 years for residential homes where construction started after 15 September 1987
• Depreciating assets: items such as ovens, carpets and air conditioners are claimed over their effective life. For residential properties bought after 9 May 2017, you generally can’t claim depreciation on second-hand assets that came with the property, only on assets you buy new
• Improvements: renovations and extensions aren’t repairs. They’re usually claimed over time as capital works, not all in one year

What you can’t claim

• Travel to inspect, maintain or collect rent on a residential rental property (not deductible since 1 July 2017)
• The principal part of your loan repayments
• Costs for any period the property was used privately or not genuinely available to rent
• Initial repairs to fix damage that existed when you bought the property (these are capital costs)

Common mistakes

• Claiming a full year of expenses when the property was only rented for part of it
• Claiming interest on the part of a loan used for something else, such as a car or holiday
• Treating an improvement as a repair
• Not apportioning costs when you own the property with someone else (claims follow your share of ownership)
• Forgetting to declare all rental income, including bond money you kept

Records to keep

Keep rental statements, loan statements, receipts and invoices for at least five years from when you lodge the return. Keep purchase and sale documents, including your settlement statement, for as long as you own the property and five years after you sell, because you’ll need them for capital gains tax.

General information only, written on 11 October 2026. It doesn't take your personal circumstances into account. Rates, grants, tax rules and concessions change, so speak with us before making a decision.