Investment Property Deductions - What Landlords Should Be Reviewing Before 30 June

If you own a rental property, the weeks leading up to 30 June are an important time to take stock. Rental properties are one of the most scrutinised areas in the Australian tax system — the ATO regularly flags them as a high-risk area for errors, and those errors go in both directions. Some landlords claim too much; many others don't claim nearly enough.

What you can deduct

The list of legitimate deductions for a rental property is longer than most people realise. Loan interest is deductible — but only on the portion of the loan used to purchase or improve the rental property, not on any redraws used for personal purposes. Council rates, water charges, property management fees, landlord insurance, and repairs are all claimable in full.

Depreciation is where many landlords leave money on the table. If your property contains depreciable plant and equipment — things like hot water systems, blinds, or carpets — you may be able to claim depreciation on those items each year. Older properties in particular often have unclaimed depreciation that could add up to thousands of dollars.

Repairs versus capital improvements

This is one of the most common points of confusion for landlords, and the ATO watches it closely. A repair restores something to its original condition and is immediately deductible in full — fixing a broken fence, patching a leaking roof, or replacing a broken tap. A capital improvement adds value or extends the life of the property beyond its original state — renovating a kitchen, adding a deck, or replacing a roof with something better. Capital improvements are not immediately deductible; they are depreciated over time.

Getting this wrong in either direction causes problems. Claiming an improvement as a repair is a common error that the ATO looks for. Conversely, some landlords do not claim the depreciation they are entitled to because they mistakenly think the work is not deductible at all.

What is no longer deductible

Travel expenses to inspect or manage a rental property are no longer deductible for individual investors. This rule changed from the 2017-18 income year and catches many landlords by surprise, particularly those with interstate properties. If you have been claiming travel costs on your tax return, it is worth reviewing whether those claims are still valid.

Depreciation schedules and borrowing costs

If you have never had a quantity surveyor prepare a depreciation schedule for your property, it is worth investigating — particularly for properties built after 1985 or those that have had significant renovations. A depreciation schedule can legitimately reduce your taxable income for years, and in many cases the cost of having one prepared is itself tax deductible.

Borrowing costs — things like loan establishment fees, mortgage broker fees, and stamp duty on the mortgage — can also be deducted, spread over five years or the life of the loan, whichever is shorter. Many landlords either miss these entirely or stop claiming them partway through the loan term.

Review before you lodge

Before lodging your tax return this year, gather and review your rental property records. That means bank statements, property management statements, invoices for any work done, and loan documents relating to the property. If any transactions are unclear, resolve them now rather than under pressure when your accountant is asking questions.

A pre-lodgment review gives your accountant the best chance to identify deductions you may have missed, and to make sure everything claimed is properly substantiated — which is exactly what the ATO expects.

Proposed changes on the horizon: negative gearing and CGT

While the current rules apply fully for your 2025–26 tax return, property investors should be aware that the Federal Government's Tax Reform No. 1 Bill 2026 is currently before parliament. The bill proposes to limit negative gearing to newly constructed properties only, starting from 1 July 2027. Existing investment properties held as at 7:30pm on 12 May 2026 (meaning you had already signed a contract) would be grandfathered under the proposal — meaning current deduction rules would continue to apply to those properties. However, any new property purchased (contract signed) after that date would only qualify for negative gearing if it is a new build. The bill has not yet passed, and its fate depends on the Senate crossbench, but if you are considering purchasing an investment property, this is an important development to factor into your decision.

If you own a rental property and are not sure whether your deductions are complete or accurate, get in touch with us before 30 June. We can review your records and make sure you are claiming everything you are entitled to — nothing more, nothing less.