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
- Australian landlords can claim mortgage interest, council rates, insurance, repairs, management fees, depreciation, and more against rental income.
- Only the interest portion of your mortgage is deductible, not the principal repayment.
- Repairs are claimed in full the year you pay for them, but improvements must be depreciated over multiple years.
- The ATO requires you to keep rental property records for five years from lodgement, and capital item records for the life of the property plus five years after sale.
- Travel to inspect your rental property has not been deductible for individual landlords since 1 July 2017.
Owning a rental property comes with real costs: mortgage repayments, insurance, council rates, the occasional burst pipe. The upside is that most of those costs are deductible against your rental income, which can make a meaningful difference to your tax bill at the end of the financial year.
The catch is that you have to actually track them. Miss a receipt, forget a payment, or mix up what counts as an immediate deduction versus a capital expense, and you leave money on the table. This guide covers what you can claim, what you cannot, and the record-keeping habits that make tax time far less painful.
What You Can Claim
The ATO allows you to deduct expenses that are directly related to earning rental income. There is a broad list, and it is worth knowing all of it, because many landlords routinely miss a few categories.
For a full breakdown of every expense type and how to categorise them, see our guide to landlord expenses you can claim.
Interest on your loan
If you have a mortgage on your investment property, the interest portion of each repayment is deductible. The principal repayment is not. If you have a split loan or an offset account, you will need to be careful about how you calculate the deductible amount. Your accountant or lender can help you work this out. If your total deductible expenses exceed your rental income, your property may be negatively geared. Use the negative gearing calculator to see where you stand.
Council rates and water charges
Both are fully deductible in the year you pay them. If your tenant pays water usage charges directly, you can only claim the fixed supply charge that falls on you.
Insurance
Landlord insurance, building insurance, and contents insurance (if you provide furnishings) are all deductible. Keep the annual renewal invoice. It is the receipt you will need.
Repairs and maintenance
This is one of the most commonly misunderstood areas of rental property tax. Genuine repairs, such as fixing a broken hot water system, repainting walls damaged by a tenant, or replacing a cracked tile, are deductible in full in the year you pay for them.
Improvements are different. If you renovate the kitchen or add a new deck, that is a capital improvement, and it is claimed differently over time. The line between repair and improvement is not always obvious. See our guide on claiming maintenance and repairs on your investment property for practical examples.
Depreciation
As the building and fittings in your rental property age, their value declines. The ATO lets you claim that decline as a deduction. This is called depreciation.
There are two streams: capital works (the building structure itself) and plant and equipment (appliances, carpets, hot water systems, and so on). Depreciation can add up to thousands of dollars a year, but you need a quantity surveyor's report to claim it correctly.
For a detailed walkthrough of how depreciation works and how to calculate it, read our guide on how to calculate depreciation for your rental property.
Estimate Your Depreciation Deduction
Enter the cost, purchase date, and effective life of an asset below to see what you could claim each financial year.
Enter asset cost, purchase date and effective life to see your depreciation schedule.
Management fees and letting fees
If you use a property manager, their fees are fully deductible, including letting fees charged when a new tenancy starts. If you self-manage, you cannot claim a fee you never paid, but you can claim other out-of-pocket costs like advertising.
Advertising for tenants
Listing your property on a rental platform, paying for photography, printing signs. All deductible. Keep the invoices.
Body corporate fees
If your property is in a strata complex, your regular body corporate levies are deductible. Special levies used for capital improvements may not be. Check with your accountant.
Pest control
Routine pest control is a deductible maintenance expense.
Land tax
If you pay land tax on your investment property, it is deductible. The rules vary by state; see our land tax guide for Australian landlords for current thresholds and rates, or check your liability with the land tax calculator. Confirm with your accountant what applies in your situation.
Travel expenses
Since 1 July 2017, the ATO no longer allows landlords to claim travel to inspect their rental property or collect rent. This applies to all residential rental investors regardless of how often they travel or how far they live from the property. The only exception is where the property is genuinely part of a business operation, which is rare for individuals owning a small number of rentals.
When You Can and Cannot Claim
The fundamental rule is that your property must be rented or genuinely available for rent for you to claim expenses against it.
If you use the property yourself for part of the year (holiday home, for example) you can only claim expenses proportional to the time it was available for rent. If the property is listed at an unrealistic rent that prevents it from being tenanted, the ATO may consider it not genuinely available, and disallow your deductions.
Expenses incurred before the property was first rented, such as costs while you were renovating it to get it ready, may be claimable, but the rules depend on the specific circumstances.
Immediate Deductions vs Capital Deductions
Not everything you spend on a rental property can be written off in the same year you spend it.
Immediate deductions are expenses you can claim in full in the year you incur them. This includes most of the day-to-day costs: interest, insurance, rates, repairs, management fees, and advertising.
Capital deductions are spread over time. If you spend money on something that improves the property or extends its life, such as a new kitchen, a structural extension, or capital works, you claim that cost as a deduction over several years, not all at once. Depreciation falls into this category too.
Getting this distinction right matters. Claiming a capital improvement as an immediate deduction in the wrong year is an error the ATO looks for. If you are unsure, ask your accountant before you lodge.
Record-Keeping Requirements
The ATO requires you to keep records for five years from the date you lodge the tax return in which the deduction is claimed. For capital items, that clock starts from the date you dispose of the asset, which for many landlords means keeping records for as long as you own the property and then five years beyond.
What you need to keep:
- Receipts and invoices for every expense you claim
- Loan statements showing the interest charged each month
- Bank statements that corroborate payments
- A depreciation schedule if you are claiming depreciation
- Rental income records: lease agreements, rent receipts, and any bond documentation
A shoebox of paper receipts technically satisfies the requirement, but a digital system makes it far easier to find what you need in a hurry, especially if you are ever audited or your accountant asks a question about a specific payment from two years ago.
Common Mistakes Landlords Make
Claiming the full mortgage repayment, not just the interest. Only the interest portion is deductible. The principal is a capital repayment.
Mixing up repairs and improvements. Replacing broken items is a repair. Upgrading to something better is generally an improvement, even if the old item was worn out.
Forgetting small but recurring costs. Postage, bank fees on a rental account, the cost of accounting software. These add up across a year and are often overlooked.
Not getting a depreciation schedule. Many landlords skip this because it requires hiring a quantity surveyor. That can be a costly mistake. Depreciation on a decent-sized property can represent thousands of dollars in deductions each year.
Losing receipts. Claiming a deduction you cannot substantiate is a risk if you are audited. If you cannot produce the receipt, the ATO can disallow the claim.
Claiming expenses for periods the property was not available for rent. If the property sat vacant because you were not trying to rent it, or because you used it yourself, you cannot claim for that period.
Keeping It All Together
The landlords who get the most from their tax deductions are the ones who treat record-keeping as an ongoing habit rather than a mad scramble every June. That means logging expenses as they happen, filing receipts immediately, and reconciling your rental income and costs monthly rather than annually.
Track Every Deduction Automatically
propkt tracks all of these deductions across your portfolio and generates a complete tax package for your accountant at EOFY: income summary, depreciation schedule, categorised transactions, and every receipt in one download. Get started free with your first property.