Updated October 2026, 2026 tax changes: from 1 July 2027, negative gearing for residential property is generally limited to eligible new builds (later buyers of that dwelling can't access it), and the 50% capital gains tax discount for individuals, trusts and partnerships is replaced with cost base indexation and a 30% minimum tax on gains. Properties held at 7:30pm (AEST) on 12 May 2026 keep their existing negative gearing treatment, and the changes to capital gains tax apply only to gains that accrue after 1 July 2027; investors in new builds can choose the 50% discount or the new rules. Both changes are now law; see the ATO. This is general information only; speak to a registered tax agent about your situation.
Australia’s tax system has specific rules for property investors.
Many of these rules cover the investment property tax deductions you can claim. Investment property calculators can help you understand tax deductions available for your investment property.
Investment property tax benefits
Australia’s income tax system does not impose an annual dollar limit on the deductions that can be claimed for eligible rental property expenses.
As a quick example, when an individual sells a property held for more than 12 months, only half the capital gain is added to taxable income, for gains made before 1 July 2027.
Therefore, to equip you with all the knowledge you need to know, let’s take a closer look at each of tax deductions.
What can you claim on tax?
1. Advertising expenses
You may have to pay some advertising or marketing costs as a landlord to find a suitable tenant. If you’re using the internet, print media, brochures, or flyers to market your property, you can deduct these advertising costs from your income rental.
2. Property Management expenses
All property management expenses are tax-deductible. These fees might include (but are not limited to):
- Utilities like electricity and gas
- Phone and internet costs
If your tenants pay for utilities, however, you won’t be able to claim it as a rental property deduction.
Cleaning services are another expense that can be deducted from your taxes. If you and your tenant agree on a weekly cleaning service or if you need to employ one to have your house professionally cleaned after the tenant vacates, this would be a tax deductible for your investment property.
In addition, if your investment property is on a strata title, you can also deduct the cost of body corporate fees (apartments and townhouses).
3. Maintenance expenses
Maintenance refers to the process of repairing the wear and tear of the building. In this case, you may need to hire a professional to help you do the job.
These expenses might include:
- Plumbing
- Electrical
- Handyman fees
- Gardening costs
- Pest Control
However, please keep in mind that the purpose of these expenses needs to be to maintain the property, not to improve it. For example, it’s okay to get tax deductions on plumbing service, not on updating a whole wooden floor.
4. Rates and Taxes
All rates, including water and council rates, can be deducted for the year they are paid. However, you can only claim them during the periods in which the house was rented. So, for example, if your property is rented for only 6 months during the year, you can only claim those rates for that same 6 months.
Land tax can also be deducted if your investment property is rented out. Land tax amounts, payment dates, thresholds, and some applicable exemptions and concessions can be varied by state and territory, so it’s important to check what applies to you.
5. Insurance Fees
If your investment property is covered by insurance, you can claim this costs in your tax return. If you are a landlord, you can get your property covered by tenant-related risks such as damage to the contents and buildings or loss of rental income.
6. Loan Interest
This is also the most significant investment property tax deduction that you can claim.
If you have to take out a loan from the bank to purchase your investment property, you can claim any interest charged on loan as an investment expense.
For example, if you take out a $400,000 loan to buy an investment property and the interest on your repayment is $12,000 after a year, you can claim the interest because your loan was used for income-generating purposes.
However, if you use a portion of your loan for personal use, such as buying for a new car or a wedding, you will only be allowed to claim the proportionate portion that you used for investing purposes.
7. Legal expenses
While the legal expenses associated with purchasing or selling your investment property aren’t tax deductible, any legal or tax consulting services you seek to maintain your rental property are tax-deductible expense.
8. Agents and Admin fees
Same as legal expenses, you might not know that your rental agents’ fees and commission and other administrative costs are also tax-deductible.
For example, as a landlord, you might need to use stationery or postage to interact or communicate with your tenants.
9. Depreciation deductions
Like any other tangible asset, your property and everything inside, like windows, furniture, carpets or curtains, can be depreciable assets. However, second-hand depreciating assets (such as furniture, carpets, curtains and appliances) in a residential rental property bought after 7:30pm on 9 May 2017 generally cannot be depreciated, although exceptions apply.
These items are deducted over their effective life, not immediately.
However, as everything depreciates at a different rate, plus it will depend on when your property was built and whether you have new or second-hand fittings, a quantity surveyor can prepare a depreciation schedule, and their fee is generally deductible.
What can’t you claim?
1. Costs involved in the purchase or sale of the property
These costs include purchase prices, stamp duty on the purchase, legal expenses and conveyancing fees, first inspection fees, etc.
2. Any expenses relating to your personal use of the property
You can only deduct expenses for parts of the house that are used for investment. So if you are an owner of a 4-bedroom apartment but only rent out 1 bedroom, you can only claim tax deductions on the bedroom you put out for rent.
3. Any expenses tenants have paid
All rental bills you pay for might be deductible, but anything the tenant themselves pay for (like utility bills or strata rate) are not.
4. Borrowing costs in full in one year
Borrowing costs, such as loan establishment fees, lenders mortgage insurance, title search fees and costs for preparing mortgage documents, are deductible but usually not all at once. If they total more than $100, they are deducted over five years, or over the loan term if that is shorter, and any balance not yet deducted can be claimed if the loan is repaid early. Borrowing costs for any part of the loan used for personal purposes can’t be claimed.
Other tax rules that affect property investors
Negative Gearing
A negatively geared property loses money with respect to cash flow, which means your costs exceed the income.
Negative gearing allows the net rental loss to be deducted against other income, such as your salary and business income, which reduces your taxable income. However, from 1 July 2027 this is limited to properties held at 7:30pm (AEST) on 12 May 2026 and eligible new builds.
Capital Gains Tax (CGT)
CGT is the tax you pay in a tax year on profits from selling assets, such as an investment property. If you’re an individual, the tax rate paid is the same as your income tax rate for that year.
Put it simply, if you bought and sold your investment property, your net capital gains will be added to your income and increase your income tax.
However, if you have capital gain and you’ve held that asset for greater than 12 months, and you are an Australian resident for tax purposes, you can reduce your capital gain by 50%. This is called the capital gains tax (CGT) discount. From 1 July 2027 it applies only to gains accrued before that date; later gains use cost base indexation and a 30% minimum tax, although investors who buy new builds can choose the 50% discount or indexation.
Conclusion
When it comes to the amount of tax that must be paid, the way an investment property is owned can make a big impact.
Therefore, it is critical for investors to carefully analyse how their properties are owned and the potential impact of land tax on their property’s return.
Claiming deductions correctly requires accurate calculations, which is where an income tax calculator and income tax calculator Australia are useful tools. A registered tax agent can confirm how the rules apply to you.
Talk to our finance team at Liviti today on (02) 9056 4311 or talk to a property expert today.
