Rental Property Tax Deductions: A Complete Guide for Landlords

Owning a rental property in NSW can be a great investment — and there are significant tax deductions available to help offset your costs. Here's a comprehensive guide to what you can claim.

Immediately Deductible Expenses

These expenses can be claimed in full in the year they are incurred:

Interest on your investment loan — one of the largest deductions available
Council rates and water charges
Landlord insurance and building insurance
Property management fees
Repairs and maintenance — must be to restore the property to its original condition, not improve it
Advertising for tenants
Stationery, postage, and phone calls related to managing the property
Travel to inspect the property (note: travel deductions were removed from 1 July 2017 for residential properties)

Capital Works Deductions (Division 43)

The construction cost of the building itself can be depreciated at 2.5% per year over 40 years, provided the building was constructed after 15 September 1987. A quantity surveyor's report can help you identify the full claimable amount.

Depreciation on Plant and Equipment

Assets within the property (carpet, appliances, hot water systems, etc.) can be depreciated over their effective life. Note: for properties purchased after 7 May 2017, only new assets can be depreciated by investors — second-hand assets are no longer eligible.

Negative Gearing

If your rental expenses exceed your rental income, you have a negatively geared property. The net loss can be offset against your other income (such as salary), reducing your overall tax liability.

Capital Gains Tax on Sale

When you sell your investment property, any profit is subject to Capital Gains Tax (CGT). If you've owned the property for more than 12 months, you're entitled to a 50% CGT discount as an individual.

Get Expert Advice

Rental property tax can be complex. Our registered tax agents at Illawarra Accounting and Tax can help you maximise your deductions and ensure full ATO compliance. Contact us today.