Rental Properties
My Rental Property - What Expenses Can I Claim?
Owning a rental property can provide valuable tax deductions, but not every expense is deductible immediately. Some costs must be claimed over several years, while others form part of the property’s cost base and are generally taken into account when the property is sold.
Expenses that may be deductible include:
Building and landlord insurance
Council rates
Water charges paid by the property owner
Interest on money borrowed to purchase, repair or improve the property
Ongoing loan account and bank fees
Property management fees and commissions
Land tax
Advertising for tenants
Body corporate or owners corporation administration fees
Cleaning, gardening, lawn mowing and pest control
Legal expenses relating to the ongoing tenancy, such as recovering unpaid rent
Accounting and tax advice relating to the rental property
An expense is generally deductible only to the extent that it relates to earning rental income. Private expenses and costs relating to periods when the property was not genuinely available for rent may need to be excluded.
Interest and loan expenses
Interest may be deductible where the borrowed money was used to purchase, maintain or improve the rental property.
It is the use of the borrowed money—not merely the property offered as security for the loan—that determines whether the interest is deductible. Interest on money redrawn or refinanced for private purposes is not deductible.
Loan establishment fees, mortgage registration fees, lenders mortgage insurance and similar borrowing expenses are generally claimed over five years, or over the term of the loan if it is shorter. They are not usually deductible in full when paid.
Principal repayments are not deductible.
Repairs and maintenance
A repair restores something that has deteriorated or been damaged while the property was being rented. Examples may include repairing a broken window, fixing a leaking tap or replacing part of a damaged fence.
Repairs are generally deductible where they arise from normal wear and tear or damage occurring while the property is producing rental income.
However, the following are not normally immediately deductible:
Repairs needed when the property was purchased
Work that substantially improves the property
Replacing an entire asset rather than repairing part of it
Renovations, extensions and structural improvements
These costs may instead be claimed over time as capital works or depreciation, or included in the property’s CGT cost base.
Depreciating assets
A deduction may be available for the decline in value of eligible depreciating assets used in the rental property, such as:
Air conditioners
Hot water systems
Ovens and cooktops
Dishwashers
Blinds and curtains
Furniture supplied with the property
Some removable floor coverings
The deduction is calculated using the asset’s cost, effective life, date installed and the applicable depreciation method. It is not based on an estimate of how much value the asset appears to have lost.
For residential rental properties, deductions are generally not available for previously used—or second-hand—depreciating assets acquired with the property or purchased for private use before being installed. Deductions may still be available for eligible new assets purchased for the property.
Capital works
Construction costs and structural improvements are generally claimed as capital works deductions over a number of years rather than being deducted immediately.
These may include:
Building construction costs
Structural renovations
Extensions
Kitchens and bathrooms
Built-in cupboards
Retaining walls
Permanent fencing
Some driveways and paving
Eligibility and the rate of deduction depend on when the work was completed and how the property is used.
Changes to Negative Gearing from 1 July 2027
The 2026 Federal Budget introduced major changes to negative gearing for residential rental properties. These changes have now been legislated.
Properties held before Budget night
An established residential property held before 7:30 pm AEST on 12 May 2026—including a property under a binding purchase contract at that time—will be grandfathered.
Rental losses from these properties can continue to be deducted against other taxable income, such as salary, business income and investment income.
Established properties acquired after Budget night
For an established residential property acquired after 7:30 pm AEST on 12 May 2026:
The existing negative gearing rules continue until 30 June 2027.
From 1 July 2027, a net rental loss cannot be deducted against salary, wages or other non-residential income.
The loss may be applied against other residential property income, including relevant capital gains.
Any remaining loss can be carried forward for use against residential property income in a future year.
The expenses themselves do not disappear. The change affects when, and against what type of income, the resulting rental loss can be used.
New residential properties
Qualifying new residential properties will continue to have access to negative gearing.
Broadly, a new build must genuinely add to the housing supply—for example:
A dwelling constructed on previously vacant land
A newly constructed apartment purchased off the plan
A duplex replacing a single dwelling
A substantial renovation or knock-down rebuild that does not increase the number of dwellings will generally not qualify.
Commercial properties
The negative gearing changes apply only to residential property. Commercial properties remain subject to the existing deduction rules.
