Founding beta · 20 spots, 14 still open — get 12 months of Pro, free. Apply →
    PropAlly
    Tax answer

    What tax deductions can Australian landlords claim?

    Short answer: Australian landlords can claim: loan interest, agent management fees and advertising, council rates and land tax, body corporate fees, water charges, insurance, repairs and maintenance, pest control, gardening, cleaning, Division 40 depreciation on plant and equipment (limited on second-hand assets post-2017), Division 43 capital works at 2.5% on the construction cost of buildings post-1985, and borrowing expenses spread over the lesser of the loan term or 5 years. Not deductible: the property purchase price, stamp duty on the transfer, principal repayments, or expenses for periods the property was not genuinely available for rent.

    The full list of deductions (2026)

    Everything below is deductible if the property was rented or genuinely available for rent during the period.

    Ongoing operating deductions

    • Loan interest — the interest portion of the mortgage, plus borrowing expenses spread over 5 years or the loan term (whichever is shorter).
    • Property management fees — the agent's management commission, letting fee, and advertising.
    • Council rates, land tax, body corporate — annually, in the year paid.
    • Insurance — landlord, building, and contents (contents you own that are in the property).
    • Repairs and maintenance — restoring existing condition; immediately deductible.
    • Water, cleaning, gardening, pest control — expenses you pay directly (not on-charged to the tenant).
    • Stationery, phone, postage — the portion attributable to rental activity.

    Depreciation (non-cash)

    • Division 43 capital works — 2.5% of the original construction cost per year for 40 years. Building shell only.
    • Division 40 plant and equipment — depreciation on removable assets (oven, dishwasher, blinds, hot water system). Post-9-May-2017 buyers can only claim on assets they install themselves.

    Depreciation is often the difference between a positively and negatively geared property on paper — model both Div 40 and Div 43 in the negative gearing calculator to see the after-tax impact before EOFY.

    Bond and dispute costs

    Legal costs for evicting a defaulting tenant or recovering unpaid rent are deductible. Legal costs of buying or selling the property are not — they go into the capital gains calculation instead.

    Three ATO amendment traps

    1. Available for rent, or not really

    The ATO checks that "available for rent" is genuine. Listing at 30% above market rent, refusing to advertise, or restricting to family-only reduces or eliminates the year's claim.

    2. Repairs disguised as improvements

    A new kitchen isn't a "repair" even if the old one was ruined. The initial repair to make a property lettable after purchase is also not deductible — it's capital.

    3. Apportionment of jointly-owned properties

    Ownership share is set at purchase and doesn't change to suit the higher-earner. Both owners claim in proportion to their legal share.

    How PropAlly handles this

    PropAlly's PropertyTax module maps every expense to the correct ATO category, runs Division 40 + 43 depreciation, and exports a rental schedule your accountant can drop straight into your return. Free for your first property. See the full worked example in the tax deductions checklist, and use the negative gearing calculator to see how these deductions convert into an after-tax cashflow position for a negatively geared property.

    Related reading

    General information only, not tax advice. Every situation is different — check with a registered tax agent before lodging.

    Frequently asked questions

    Can I claim interest on my investment loan?▾

    Yes — the interest portion of loan repayments is fully deductible for periods the property is rented or genuinely available for rent. Principal repayments are not deductible. If the loan is redraw-mixed (personal + investment), the deductible fraction is proportional to the investment balance.

    What is Division 43 and how much can I claim?▾

    Division 43 is capital works — the building shell itself. For residential properties where construction started after 15 September 1987, you can claim 2.5% of the original construction cost each year for 40 years. A depreciation schedule from a quantity surveyor establishes the base amount.

    What changed in 2017 for depreciation?▾

    For residential properties bought after 9 May 2017, you cannot claim Division 40 depreciation on second-hand plant and equipment (ovens, dishwashers, blinds, etc. that were already in the property when you bought it). New assets you install yourself are still fully depreciable. Division 43 capital works is unaffected.

    Can I claim travel to inspect the property?▾

    Since July 2017, individual investors cannot claim travel expenses to inspect residential rental properties (companies and SMSFs are treated differently). Agent-arranged inspections and property manager visits are still deductible as part of management fees.

    What about repairs versus improvements?▾

    Repairs restore the property to its previous condition (fixing a leaking tap, patching plaster) — immediately deductible in the year paid. Improvements upgrade or extend the property (new kitchen, extension) — claimed over years via Division 43 (2.5%) or Division 40 (asset by asset). The classification is the single most audited line on a rental schedule.

    What is not deductible?▾

    The property purchase price, stamp duty on the transfer, principal loan repayments, expenses for periods the property was not genuinely available for rent (e.g. a "holiday-let only to family"), expenses for private use, and travel to inspect residential rentals for individual investors.

    Track your portfolio in one place

    PropAlly is free for your first property. No credit card. Australian-built.