Australian property investors can claim a wide range of tax deductions to reduce the net cost of owning an investment property. In 2026, the ATO permits deductions for all expenses directly related to producing rental income — provided they are incurred while the property is rented or genuinely available for rent. Here are the top rental property tax deductions available to Australian investors in 2026.

1. Loan Interest

Interest on money borrowed to purchase, improve, or maintain a rental property is the largest deduction for most investors. In 2026, with investment loan rates typically between 6-7%, interest on a $600,000 investment loan could generate $36,000-$42,000 in annual deductions. Importantly, only the interest portion of repayments is deductible — principal repayments are not.

2. Property Management Fees

Agent management fees (typically 7-10% of weekly rent in Australia), letting fees (typically one to two weeks rent), lease renewal fees, and advertising costs for tenants are all fully deductible in the year incurred.

3. Depreciation: Building Allowance and Plant & Equipment

Depreciation is a non-cash deduction that can significantly increase your overall claim:

  • Division 43 building allowance: 2.5% of the original construction cost per year for buildings constructed after 18 July 1985. Requires a quantity surveyor's tax depreciation schedule.
  • Division 40 plant and equipment: Appliances, carpet, blinds, hot water systems — depreciated at ATO-prescribed effective lives. New properties claim full value; existing properties purchased after 9 May 2017 cannot claim depreciation on second-hand plant and equipment items.

4. Repairs and Maintenance

Repairs that restore the property to its original condition (replacing a broken hot water system, fixing a leaking roof, repainting worn surfaces) are immediately deductible. Improvements that enhance the property beyond its original state (adding a second bathroom, building a deck) are capital expenditure — deducted over time as depreciation, not immediately.

5. Council Rates, Water, and Land Tax

Council rates, water rates (landlord's portion), and land tax levied on an investment property are all deductible in the year paid. Land tax rates vary significantly by state — NSW and Victoria have among the highest rates in Australia, with NSW land values subject to a 1.6% tax on the unimproved value above the threshold.

6. Insurance Premiums

Landlord insurance (covering rental default, malicious damage, and public liability) and building insurance for an investment property are both fully deductible. Contents insurance for furnished properties is also deductible for landlord-owned contents.

7. Accounting and Legal Fees

Tax agent fees for preparing your rental schedule, accountant fees for investment advice, and legal fees related to tenancy disputes or lease preparation are deductible. Legal costs of purchasing the property (conveyancing) are capital and form part of the CGT cost base, not an immediate deduction.

8. Travel to Inspect the Property

From 1 July 2017, travel expenses to inspect, maintain, or collect rent from residential rental properties are no longer deductible for individual investors. This change does not affect genuine property management businesses or travel related to commercial properties.

Frequently Asked Questions

Is negative gearing still available in 2026?

Yes. Negative gearing — where rental expenses exceed rental income and the loss is offset against other income — remains fully available in 2026. The government has not changed this policy. Negatively geared investors reduce their taxable income by the net loss, generating a tax saving at their marginal rate.

Do I need a depreciation schedule?

A quantity surveyor's tax depreciation schedule is the only ATO-accepted method for estimating depreciation on a property you did not construct yourself. Schedules typically cost $400-$700 but can generate depreciation deductions of $3,000-$15,000+ per year. They are one-off costs and are themselves tax deductible.

Can I claim deductions if the property was vacant?

Yes, if the property was genuinely available for rent (advertised at market rent, not set to deter tenants). Expenses incurred during a genuine vacancy period remain deductible. If you used the property for personal purposes or set the rent below market to favour family members, deductions are not available for that period.

Own an investment property? Contact AWTS for a complete rental property tax review and depreciation schedule referral.