Tax deductions are one of the key reasons Australians invest in property. Understanding what you can and cannot claim is essential for maximising your return and staying compliant with the ATO. Here is the complete 2026 guide to investment property tax deductions.
What Tax Deductions Can I Claim Immediately?
| Deduction | Claimable | Notes |
|---|---|---|
| Loan interest | Yes — 100% | Only the investment portion of the loan |
| Property management fees | Yes — 100% | Agent fees, letting fees, renewal fees |
| Council rates | Yes — 100% | Apportioned if property was not available for rent all year |
| Water charges | Yes — 100% | Landlord-paid water only |
| Insurance | Yes — 100% | Landlord insurance, building insurance |
| Repairs and maintenance | Yes — 100% | Must be genuine repairs, not improvements |
| Advertising costs | Yes — 100% | Tenant search advertising |
| Accounting fees | Yes — 100% | Portion related to investment property |
| Pest control | Yes — 100% | Routine pest control |
| Cleaning | Yes — 100% | End of tenancy or routine cleaning |
What Can I Claim Over Time (Capital Works and Depreciation)?
Building depreciation (Division 43) allows you to claim 2.5% of the original construction cost each year for buildings constructed after 16 September 1987. Plant and equipment depreciation (Division 40) covers fixtures and fittings — appliances, carpets, blinds — and is claimed at ATO-set effective life rates. A quantity surveyor’s depreciation schedule (typically $600-$900) is essential for maximising these claims.
What Can I NOT Claim?
- Loan principal repayments (capital, not deductible)
- Stamp duty and conveyancing (added to cost base, reduces CGT later)
- Improvements and renovations (claimed as capital works over 40 years, not immediately)
- Depreciation on second-hand residential plant and equipment purchased after 9 May 2017 (budget change — new properties unaffected)
- Personal use portions if property is partly used privately
What Is the Difference Between Repairs and Improvements?
The ATO distinguishes between repairs (restoring something to its original condition — immediately deductible) and improvements (upgrading or enhancing — claimed as capital works over 40 years). Replacing a broken hot water system with a like-for-like unit is a repair. Replacing it with a solar system is an improvement.
GeeVee Verdict
A well-structured investment property generates significant tax deductions that improve your annual cash flow. Getting a depreciation schedule, using a specialist property accountant, and keeping meticulous records are the three most important steps. The ATO audits rental property claims heavily — accuracy is non-negotiable.
Frequently Asked Questions
Can I claim travel expenses to inspect my investment property?
No. Since 1 July 2017, travel expenses to inspect, maintain or collect rent from a residential investment property are no longer tax-deductible for individual investors.
Can I claim interest during construction?
Interest during construction of an investment property is deductible from the date construction begins, provided the property will be available for rent when complete.
Do I need a quantity surveyor?
For new properties or properties built after 1987, a quantity surveyor’s report is the most accurate way to calculate building and plant depreciation. The ATO requires reasonable estimates — a QS report provides an ATO-compliant basis.
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