Investment Property Tax Deductions Australia: Complete List
Tax deductions are a significant part of the financial case for investment property in Australia. Knowing which expenses are deductible — and how to claim them correctly — can materially reduce your tax bill each year.
Immediately Deductible Expenses
The following costs incurred while the property is available for rent or is rented are deductible in the year they are incurred:
Loan Interest
Interest on the investment loan is typically the largest deduction. If you have a split loan (part investment, part personal), only the investment portion is deductible. Keep all loan statements.
Property Management Fees
Fees paid to your property manager, including ongoing management (typically 7–10% of rent), letting fees (for finding new tenants), lease renewal fees, and inspection fees. These are all fully deductible.
Council Rates and Water Rates
Rates charged by the local council and water authority are deductible. Water usage charged to tenants is not your deduction — but the service charge (if paid by you) is.
Landlord Insurance
Annual premiums for landlord insurance — covering malicious damage, rent default, and liability — are fully deductible. Standard home and contents insurance is not deductible unless it is specifically for an investment property.
Repairs and Maintenance
Repairs — restoring something to its original condition — are fully deductible. Maintenance — keeping the property in good working order — is also deductible. Examples: fixing a broken tap, repainting weathered walls, replacing a worn carpet.
Improvements and capital works — making something better than it was before — are not immediately deductible. They must be depreciated over time (see below).
Advertising for Tenants
Costs for listing on rental platforms, signage, and photography when finding new tenants are deductible.
Legal and Professional Fees
Legal costs for preparing or renewing a lease agreement are deductible. Accounting and tax agent fees related to your investment property are also deductible.
Strata/Body Corporate Levies
For apartments and units, strata levy costs (routine administration) are deductible. Special levies for major capital works may need to be treated as capital expenditure.
Depreciation Deductions
Two types of depreciation apply to investment properties:
Plant and Equipment (Division 40)
Removable items such as ovens, dishwashers, air conditioners, hot water systems, and carpet. For properties purchased after 9 May 2017, new investors can only claim depreciation on new plant and equipment. Depreciation on second-hand plant and equipment can only be claimed if you installed it yourself.
Capital Works (Division 43)
Structural elements: the building itself, fixed flooring, walls, wiring, and plumbing. The deduction rate is 2.5% per year for 40 years on the original construction cost. This applies to residential buildings constructed after 17 July 1985.
A quantity surveyor can prepare a depreciation schedule estimating the deductible amounts — this typically costs $500–$800 but is itself tax deductible, and the schedule can save thousands over the life of the property.
Non-Deductible Expenses
The following are not deductible:
- Stamp duty and conveyancing costs on purchase (added to your cost base for CGT purposes)
- Loan establishment fees (may be deductible over five years)
- Borrowing costs under $100 (immediately deductible) or over $100 (spread over five years or the loan term)
- Personal expenses mixed with investment use
- Expenses incurred when the property is used privately
Record-Keeping
The ATO requires you to keep records for all claimed deductions for at least five years after lodging your return. Use a spreadsheet or property management software to track all income and expenses. Your property manager's annual financial statement is a useful source for most recurring costs.
Use the Investment Property Calculator to estimate how tax deductions affect your overall cash flow and after-tax return.