Rental property tax deductions in Australia
If you rent out a property in Australia, a good chunk of what you spend on it each year can usually be claimed. The tax rules aren't the hard part for most owners — the record keeping is. This guide walks through what's generally deductible, the distinction that trips people up most, and the records worth keeping as you go.
Claim now, or claim over time
Rental expenses fall into three broad buckets. Getting an expense into the right bucket matters more than remembering every last receipt.
1. Deductible in the same year
Ongoing running costs for a property that is rented or genuinely available for rent:
- Loan interest (the interest portion only)
- Council rates, water rates and land tax
- Landlord insurance premiums
- Property manager and agent fees
- Repairs and maintenance
- Advertising for tenants
- Body corporate or strata fees
- Cleaning, gardening and pest control
2. Capital works, claimed over time
Structural work and permanent fixtures — a new deck, a bathroom rebuild, a retaining wall — are generally claimed gradually over a number of years rather than all at once.
3. Depreciating assets
Items that wear out — ovens, air conditioners, carpet, blinds — are generally written off over their effective life. Rules differ for second-hand assets in residential properties, so this is worth checking with your accountant.
Repairs vs improvements
This is where most owners get it wrong. A repair restores something to the condition it was in. An improvement makes it better than it was.
- Fixing a leaking tap
- Replacing a few broken roof tiles
- Repainting a damaged wall
- Replacing the whole roof
- Adding a carport or deck
- A full kitchen or bathroom renovation
Work done to fix problems that were already there when you bought the property is generally an initial repair, and treated as capital rather than an immediate deduction.
Apportionment
If the property was only rented for part of the year, used privately for part of it, or you only rent out part of the home, expenses generally need to be split. The same applies where a loan was partly used for something other than the property. Recording the dates alongside each transaction makes this split straightforward instead of guesswork twelve months later.
Records worth keeping
- Rent received, including dates and amounts, per property
- Every expense with the date, supplier and amount
- Loan statements showing the interest charged
- Purchase, improvement and sale documents, kept for capital gains purposes
The Australian Taxation Office publishes the current rules and thresholds — see the ATO's residential rental properties guidance to check anything in this guide against the official source.
Track it as it happens
The owners who breeze through 30 June are the ones who logged each transaction the week it happened. SimplePropertyLedger keeps income and expenses per property on your own device, so a year's records are already there when your accountant asks.
Common questions
- Can I claim the whole mortgage repayment?
- No. Only the interest portion of a loan used to buy or improve the rental property is generally deductible. The principal repayment is not.
- Is a new kitchen a repair?
- Generally no. Replacing an entire kitchen is usually an improvement, claimed over time as capital works rather than immediately as a repair.
- What about work done before the property was rented?
- Work carried out to fix problems that existed when you bought the property is usually treated as an initial repair and is capital in nature, not an immediate deduction.
- Can I claim while the property is vacant?
- Expenses are generally deductible for periods the property is rented or genuinely available for rent. Private-use periods have to be apportioned out.
- How long do I need to keep records?
- Keep rental records for at least five years from the date you lodge, and keep purchase and improvement records for as long as you own the property plus five years, because they affect capital gains.
General information only. This guide is not accounting, tax or financial advice, and tax rules change. Check your circumstances with a registered tax agent before lodging.