This article is general information only and does not constitute financial or tax advice. Consult a qualified tax professional for advice specific to your situation.
Key takeaways
- Start tracking all rental expenses from settlement day, not 1 July. The ATO allows deductions from the date the property becomes available for rent.
- Only the interest portion of your mortgage repayment is deductible. The principal is not a tax deduction.
- A depreciation schedule from a quantity surveyor can generate thousands of dollars in annual deductions, and the surveyor's fee is itself tax-deductible.
- Stamp duty is not deductible. It adds to your cost base for capital gains tax when you eventually sell.
- Tenant bonds must be lodged with your state's bond authority within the required timeframe. Holding bond money in your own account is a serious breach of tenancy law.
Buying your first investment property is one of the bigger financial commitments you will make. The purchase itself gets most of the attention, but what happens in the weeks and months after settlement is where many new landlords lose track: missed deductions, overlooked obligations, and a shoebox of receipts come tax time.
This checklist covers the whole journey: from getting your finance sorted before you buy, through to setting your records up properly so your first tax return goes smoothly.
Before You Buy
Get finance pre-approval first. A pre-approval sets your actual budget before you start bidding at auctions or making offers. It also makes your offer more credible to vendors. Talk to your lender or mortgage broker about what is available for investment lending, as the interest rates, deposit requirements, and serviceability calculations are often different from owner-occupier loans. Understanding your loan-to-value ratio will help you assess whether you need lenders mortgage insurance.
Research the suburb, not just the property. Vacancy rates, average rents, proximity to transport, schools, and employment hubs all drive long-term rental demand. You can use a rental yield calculator to compare potential returns across different suburbs. A cheap property in a weak rental market can cost more to hold than a pricier one that stays tenanted consistently.
Assess depreciation potential before you sign. Newer properties built after 1987 generally offer more depreciation than older ones. A quality depreciation schedule from a quantity surveyor can generate thousands of dollars in annual deductions, sometimes more than $10,000 a year on a well-appointed property. Try the depreciation calculator for a quick estimate, then read our guide to how depreciation is calculated for rental properties before you rule out a property purely on price.
Arrange landlord insurance before settlement. Many policies let you start cover from settlement date. Landlord insurance typically covers loss of rent, damage by tenants, and public liability, all things that a standard home and contents policy will not cover. See our landlord insurance guide for what to look for and what to compare. The premium is also fully tax-deductible.
Understand stamp duty and borrowing costs. Stamp duty is not a deduction; it goes onto your cost base for capital gains tax purposes when you eventually sell. Use the stamp duty calculator to get a state-specific estimate before you commit. Loan establishment fees and lenders mortgage insurance (LMI) are deductible, but they are spread across the loan term rather than claimed all at once. For a full breakdown of which purchase costs you can and cannot claim, see our guide to rental property tax deductions in Australia.
Estimate Your Total Purchase Costs
The purchase price is only part of what you need to have ready. Stamp duty, conveyancing, inspections, and loan fees can add tens of thousands of dollars on top. Enter your details below to see the full picture.
Enter your purchase price and select a state to estimate upfront costs.
After Settlement
Lodge the bond correctly. Once you have a tenant and you receive their bond, you must lodge it with the relevant authority in your state: the Rental Bond Board in NSW, the Residential Tenancies Bond Authority in Victoria, or the RTA in Queensland. You generally have a short window to do this after receiving it. Holding bond money in your own bank account without lodging it is a serious breach of tenancy law in every state.
Use the standard residential tenancy agreement for your state. Each state has an official form, and in most cases using it is a legal requirement. Your lease should clearly cover the rent amount and due date, the bond amount, the lease term, and the rules around pets, modifications, and end-of-tenancy repairs.
Commission a depreciation schedule. If your property was built after July 1987, a quantity surveyor's report is well worth the cost. The fee is itself tax-deductible. Even if you bought an established property, you can still claim capital works depreciation on the building structure, and any new assets you install from settlement onwards can be depreciated immediately.
Set up your record-keeping system on day one. The ATO requires you to keep records for five years from the date you lodge the relevant return. For capital items, that clock starts when you sell. The landlords who find tax time easiest are the ones who logged expenses as they happened rather than reconstructing a year's worth of payments from bank statements in June.
Finding Tenants
Screen carefully before you hand over the keys. A reliable long-term tenant is worth more than getting someone in quickly. Check references, verify employment, and follow up on previous rental history. Our guide to how to screen tenants in Australia covers what you can legally ask and what to look for.
Advertise the actual rent. Price it based on comparable properties in the suburb rather than what you need to cover your mortgage. Use the mortgage repayment calculator to know your exact monthly repayment figure, but set the rent based on what the market will pay. Overpricing leaves your property sitting vacant, and a vacant property generates no income but still generates costs. Council rates, insurance, and loan interest keep running regardless.
Your Tax Obligations
You must declare all rental income in the financial year you receive it. In return, you can claim a wide range of deductions: mortgage interest (not the principal repayment, only the interest), council rates, water charges, insurance, repairs, advertising costs, and body corporate fees where applicable.
The two areas that catch most new landlords out are the distinction between repairs and capital improvements, and depreciation. A genuine repair (fixing what is broken) is deductible in full in the year you pay for it. An improvement (adding something new or upgrading beyond the original condition) is depreciated over time. Getting this wrong is one of the most common issues the ATO looks for in rental property audits.
If your total deductible expenses exceed your rental income, you are negatively geared. That loss can be applied against your other income (your salary, for example) which reduces your overall tax bill. For a detailed walkthrough, see our guide to negative gearing explained. It is a real benefit, but the economics only work long-term if the property also grows in value. Always check with your accountant for advice specific to your situation.
Common First-Timer Mistakes
Claiming the full mortgage repayment. Only the interest is deductible. The principal reduces your debt; it is not a cost you can claim.
Skipping a depreciation schedule. Many new landlords do not realise how much they are leaving unclaimed. Even a modestly sized property can have several thousand dollars in annual depreciation deductions.
Mixing rental and personal accounts. Keeping a separate bank account for rental transactions makes record-keeping far simpler and reduces the risk of missing something.
Not keeping receipts. The ATO can disallow any deduction you cannot substantiate. Digital copies are perfectly acceptable. A photo taken on your phone the day you pay a tradesperson is enough.
Letting the first tax return catch you by surprise. If you bought mid-year, your first return will only cover part of a financial year, but you should still claim every eligible deduction from the day the property became available for rent. Start tracking from settlement, not from 1 July.
propkt is built for owner-landlords at exactly this stage, tracking income and expenses by property with expense tracking, managing your tenant and lease details, storing receipts against each transaction, and generating a clean tax package export for your accountant at the end of the financial year. Your first property is free to get started.