In short: Rental property owners can generally claim loan interest, borrowing costs, running costs like rates, insurance and agent fees, repairs, and depreciation. Borrowing costs over $100 are spread over five years, and since 2017 you can’t depreciate the existing fittings in a second-hand home. Getting the category right matters more than finding new deductions.

As accountants, the old saying “a penny saved is a penny earned” is one of our guiding principles, and it should be the same for every property investor.

If you own an investment property in Australia, maximising the tax deductions you have available can make a big difference in the overall success of your venture. But whilst these deductions can keep your budget stable and your cash flow healthy, the rules surrounding them can be complicated.

In this country, there are numerous incentives to encourage consumers to invest in the property market, especially for rental income purposes. So, if your property is rented out on an ongoing basis, these are the tax deductions that you should be taking full advantage of.

What deductions can I claim for my investment property?

Mortgage Interest and Borrowing Expenses

As a property investor in Australia, you may be eligible to claim a tax deduction on the interest you pay on your investment loan.

This tax benefit applies to any property that generates taxable income (ie: rental income). Additionally, any loans acquired for costs such as renovations, repairs, or maintenance for your rental property are also eligible for an interest deduction.

Importantly, you can also claim for a whole range of other ‘borrowing expenses’ that are associated with buying a property.

Not included in borrowing expenses:

• The amount you borrow for the property

• Loan balances

• Principal repayments

• Stamp duty charged by your state

• Conveyancing and legal fees for the purchase (these form part of the property’s cost base)

What is included as borrowing expenses:

• Loan establishment fees

• Lender’s Mortgage Insurance

• Title search fees

• Bank and legal fees

• Valuation fees

For the full list of buying costs, read the 12 key costs of buying a property.

If your total borrowing expenses are more than $100, the deduction is spread over the first five years of the loan.

Only the interest is deductible, not the principal. If you have a principal and interest loan, you’ll need to work out the interest component of your loan repayments each year before claiming the deduction. Be sure to consult with your accountant to ensure you’re claiming the correct amount and maximising your tax benefits as a property investor.

Rental Property Expenses

As the owner of a rental property, you can claim a range of expenses associated with maintaining and operating your rental property.

These can include costs for the following expenses:

• Advertising

• Body Corporate Fees

• Cleaning

• Council Rates & Land Tax

• Depreciation

• Insurance

• Water Charges

• Agents Fees

• Repairs & Maintenance

It’s essential to keep detailed records of all of these expenses, including receipts and invoices, so that you can take full advantage of the tax deductions available to you. One thing you can’t claim any more: travel to inspect or maintain a residential rental has not been deductible since 1 July 2017.

Not all rental property expenses are treated the same way, though.

The rules surrounding repairs and maintenance costs are complicated and these expenses can be taxed differently. We’ll explain more about deductions related to repairs and maintenance below.

Additionally, purchases for depreciating assets that cost more than $300 (such as carpets, air conditioners and flooring) must be claimed under their rate of depreciation. Other costs such as renovations or restorations are considered ‘capital works expenses’ and also cannot be claimed immediately. We’ll also expand on depreciation later in the article.

Repairs, maintenance & capital expenditure

Ongoing fixes and maintenance can be a headache for property investors, both in terms of your time and your wallet.

If you have incurred costs associated with repairing or improving your rental property, it is crucial to understand how you can claim a deduction on these expenses.

Using the ATO’s rental property guidance, here is a summary of the different categories your expense may fall into.

• If you’re replacing something that is worn out, damaged or broken as a result of renting out the property, it is likely considered a repair which can receive a full tax deduction.

• If you’re preventing or fixing the deterioration of an item that occurred while renting out the property, it is likely considered maintenance which can receive a full tax deduction.

• If you’re repairing damage that existed when the property was bought, it will likely be classified as an initial repair which should be claimed as either Capital Works or Capital Allowances (see depreciation).

• If you’re replacing an entire structure that is only partly damaged or renovating or adding a new structure to the property, this will likely be considered Capital Works, which should be claimed under its depreciation rate.

• If you’re installing a brand new appliance or floor/window covering (costing over $300), this will likely be considered a Depreciating Asset, which should be claimed under its depreciation rate.

Before you make a claim, make sure you categorise the expense correctly to receive the appropriate tax benefit. For more information on how you can claim repairs, maintenance and capital expenditure, talk to our property investor accountants.

Depreciation

Understanding all of the rules surrounding depreciation can be enormously helpful for maximising the potential tax savings for your investment property.

As your rental property ages, the wear and tear on its structures, materials, and assets will lead to a decrease in value. Fortunately, Australian tax laws allow rental property owners to claim this decline in value as a tax deduction. These deductions, known as depreciation deductions, are divided into two categories.

The first category of depreciation deductions is known as Capital Works and covers expenses related to structural improvements, renovations, and extensions. This can include the property’s overall structure, as well as fixed items like fences, doors, toilet bowls, bathtubs, and more. For most homes built since the late 1980s, owners can claim 2.5% of the construction cost each year for up to 40 years. Older buildings may not qualify, which is one reason a quantity surveyor’s report is worth having.

The second category of depreciation is for Depreciating Assets, also known as ‘plant and equipment’ depreciation, and applies to easily removable fixtures and fittings within the property. These include items that are not structurally integral to the building itself but may add to the property’s rental value, such as carpets, air conditioners, appliances, blinds and ceiling fans. There is a big catch here. If you bought a second-hand residential property after 7.30pm on 9 May 2017, you generally can’t claim depreciation on the plant and equipment that was already in it. You can still claim new items you buy and install yourself. To help with this, a quantity surveyor can prepare a report that creates a depreciation schedule for these claims when a rental property is purchased. This report can be used to determine the depreciation rate for each item, making it easier for owners to claim their deductions accurately.

As you can see, the rules and criteria surrounding claiming for depreciation can get quite complicated, and there are a lot of details we haven’t included, so make sure you first speak to your accountant or tax professional before making a claim.

What changes for negative gearing from 2027?

For established residential properties bought after 7.30pm on 12 May 2026, from 1 July 2027 any net rental loss can only be offset against residential property income or gains, not your salary. Newly built homes keep the old treatment. If you’re buying an established property now, run the after-tax numbers with our negative gearing calculator before you sign.

If you want to be sure you’re claiming everything you’re entitled to, and nothing you’re not, our property investor accountants can go through it with you.

Frequently asked questions

Can I claim stamp duty on an investment property?

Not as a yearly deduction. Stamp duty on the purchase is part of the property’s cost base, which reduces capital gains tax when you sell.

Can I claim depreciation on an older rental property?

You may be able to claim capital works on the building if it qualifies, and depreciation on new items you install. Existing fittings in a second-hand home bought after 9 May 2017 generally can’t be depreciated.

Is loan interest on an investment property tax deductible?

Yes, the interest on money borrowed to buy or improve a rental property is generally deductible while it is rented or genuinely available for rent. Principal repayments are not.

Last updated: 7 November 2026.

General information only, based on the rules at the date above. It does not take into account your circumstances, so speak to your accountant before acting.