A tax-deductible expense is any cost you incur in earning rental income that the ATO allows you to claim as a deduction. When you claim a deduction, it reduces your taxable income, which in turn reduces the amount of tax you pay. The deduction does not give you the full amount back; it saves you tax at your marginal rate.
For example, if you spend $2,000 on property management fees and your marginal tax rate is 32.5%, claiming that deduction saves you $650 in tax.
Common Deductible Expenses
The list of deductible expenses for rental property owners is extensive. The most common include:
- Mortgage interest: the interest portion of your loan repayments (not the principal)
- Property management fees: what you pay your agent to manage the property
- Council rates and water rates: ongoing local government charges
- Insurance: landlord insurance, building insurance, and contents insurance
- Repairs and maintenance: fixing things that are broken or worn out
- Depreciation: decline in value of the building and its fixtures
- Land tax: the annual state government charge on land value
- Body corporate fees: strata levies for units and apartments
- Tax agent fees: what you pay for professional tax advice related to the property
Repairs vs Improvements
One important distinction is between repairs (deductible immediately) and improvements (deducted over time through depreciation). Replacing a broken tap with a similar one is a repair. Replacing a basic kitchen with a premium one is an improvement. The ATO treats these differently, so it pays to understand which category your spending falls into. For a detailed breakdown, see our guide to claiming maintenance and repairs on your investment property.
Why It Matters for Landlords
Every legitimate deduction you miss is money left on the table. Many landlords under-claim because they lose receipts, forget about smaller expenses, or do not realise certain costs are deductible. Keeping organised records throughout the year, not just at tax time, is the key to maximising your deductions. For the full list, see our guide to landlord expenses you can claim.
propkt automatically categorises your rental expenses and flags deductible items so nothing gets missed at tax time. Start tracking your expenses for free with your first property.