11 Essential Tax Deductions for Your Investment Property

What expenses can a property investor claim when owning an investment property?

While the costs of maintaining, repairing, and financing an investment property can accumulate quickly, the good news is that the list of deductible expenses on your tax return is extensive. In fact, it’s longer than a grocery receipt for a big family shop!

To help you maximize your tax benefits, here’s a detailed list of the top property investment tax deductions in Australia that every investor should be aware of and claim.

1. Advertising and Marketing Costs for New Tenants

When you or your property manager incur expenses to market your property—whether through online listings, print media, brochures, or signage—these advertising costs can be claimed as a deduction against your income in the same year they are paid. This includes any fees your property manager charges for promoting your property for lease.

2. Loan Interest and Bank Fees

If you have a principal and interest loan for your investment property, you cannot deduct the principal repayments. However, you can claim a tax deduction for the interest portion of your regular repayments as an investment expense. Additionally, any bank fees associated with the loan are also deductible.

3. Body Corporate Fees and Charges (Excluding Special Levies)

If your property is on a strata title, you can claim the cost of body corporate fees. These fees typically cover expenses such as maintenance of common areas, garden upkeep, and building and public liability insurance.

4. Building, Contents, Landlord, and Public Liability Insurance

The cost of insurance for your investment property is tax-deductible. This includes landlord insurance, which generally covers tenant-related risks such as damage to the building or contents, as well as loss of rental income.

5. Council Rates

Council rates are tax-deductible in the year they are paid. However, you can only claim them for periods during which the property was rented out.

6. Property Management Fees

Hiring a skilled real estate agent or property manager can help you maximize the returns on your investment property. The good news is that any fees they charge are tax-deductible. This includes fees for valuations, depreciation reports, and property inspections.

7. Depreciation on Building and Contents

To claim depreciation, you’ll need a depreciation schedule prepared. Depreciation applies to assets such as timber flooring, carpets, curtains, appliances, and furniture. You can calculate depreciation using either the diminishing value method or the prime cost method.

8. Negative Gearing

Negative gearing happens when the costs associated with owning an investment property exceed the income it generates, leading to a financial loss. This loss can be claimed as a tax deduction.

9. Gardening Expenses

You can claim immediate deductions for the upkeep and replacement of plants and garden structures. However, expenses related to improvements that enhance the property's value cannot be claimed.

10. Land Tax

If your investment property is rented out, you can claim land tax as a deduction.

11. Capital gains discount

If you sell your investment property after holding it for more than a year, you are eligible for a capital gains discount of 50%, meaning you only need to incorporate half of the capital gain into your personal tax return.