Key Takeaways
- Property investors can claim a wide range of tax deductions, including loan interest, management fees, insurance, and council rates
- Depreciation is one of the most valuable deductions, covering both the building structure and fixtures inside the property
- New properties often provide larger depreciation benefits than established properties
- Interest during construction can often be claimed as a deduction, although many investors and advisers misunderstand this
- The key rule for property deductions is that the expense must directly relate to producing rental income
Hello there. Let’s dive into what you can and can’t claim as a property investor, because this is where the difference between average and smart investors really starts to show.
There is a long list of tax deductions that property investors may be able to claim.
Some of the most common ones include loan interest, property management fees, council rates, and insurance, including both building insurance and landlord protection cover.
Investors can also claim depreciation on the building itself, along with fixtures and fittings such as ovens, carpets, and hot water systems.
Other potential deductions include repairs and maintenance needed to keep the property in good condition, as well as professional costs such as tax advice, quantity surveyor reports, and the setup of low-tax trust structures used for investing.
One of the most powerful deductions available to property investors is depreciation, but it is also one of the most misunderstood.
There are two main categories.
Division 43 covers the structural components of the building and is generally claimed at a flat rate over 40 years.
Division 40 applies to fixtures and fittings that wear out over time.
Following the tax law changes introduced in 2017, investors can generally claim significantly more depreciation on brand-new properties compared to established properties.
However, even with established homes, depreciation can still be worth thousands of dollars per year, and it is often overlooked.
Another area that many investors misunderstand is interest during construction.
A lot of accountants still believe this interest cannot be claimed, but that’s not necessarily the case.
If you are building a property in your personal name, you can generally claim the construction interest.
And if the property is being built through a trust or company structure, you may be able to claim both land and construction interest from settlement through to completion.
The golden rule of property tax strategy is simple.
Every deduction must have a clear connection to producing rental income.
If an expense does not directly relate to earning income from the property, then it will not be tax deductible.
Understanding where that line sits — and making sure you are not leaving legitimate deductions unclaimed — is key to maximising your investment returns while remaining compliant with ATO requirements.
If you’d like to dive deeper, visit the other videos in our Learning Hub.
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