Investor Finance
Investment property tax deductions: what’s claimable, what’s capital, what’s changed
The deductions most investors claim, the traps between repairs and improvements, and where the 2026 budget fits... in plain English, with your accountant holding the pen.
Every investor knows deductions exist. Fewer can say cleanly which bucket each cost falls into... claimable this year, spread over several years, or capital and waiting for the day you sell. The bucket matters more than the amount, and the boundaries are where audits live.
Here is the plain-English map. Your accountant applies it to your actual return... that division of labour is the whole point.
Generally deductible in the year you pay it
- Loan interest ... on borrowing used to acquire or run the income-producing property. The purpose of the borrowing is what counts, not which property secures it.
- Property management fees and letting costs.
- Insurance ... building, landlord and contents cover on the rental.
- Council rates, water and land tax on the investment.
- Repairs and maintenance ... restoring something worn or broken by the rental use back to its previous condition.
- Body corporate fees (administrative and general sinking fund contributions... special levies for improvements are usually capital).
- Accounting and bookkeeping for the rental, and the depreciation schedule fee itself.
Deductible, but not all at once
- Borrowing costs ... loan application fees, lenders mortgage insurance, valuation and settlement costs charged by the lender. These are typically claimed over five years, or the loan term if shorter.
- Depreciation ... the building’s capital works and eligible plant and equipment, claimed over their effective lives via a depreciation schedule.
The traps that catch real investors
- Repairs versus improvements. Fixing the broken fence paling is a repair. Replacing the whole fence with a better one is an improvement... capital, claimed slowly as capital works, not immediately. Initial repairs to problems that existed when you bought are generally capital too.
- Contaminated redraw. Redraw from an investment loan spent on personal costs blends the loan’s purpose... and with it, the interest deduction. This is a structure problem before it’s a tax problem: clean loan splits prevent it.
- Purchase stamp duty. Generally not deductible against your income... it forms part of the property’s cost base for capital gains purposes instead.
- Travel to inspect. Deductions for travel to residential rental properties were removed for most individual investors from 1 July 2017.
- Vacant or personal-use periods. Deductions generally follow the property being genuinely available for rent... weeks the family uses the beach house are not claimable weeks.
Most deduction problems I see weren’t tax mistakes. They were structure mistakes... one blended loan, one careless redraw... that turned a clean claim into an apportionment exercise.
Where negative gearing and the 2026 budget fit
When the deductible costs exceed the rent, the shortfall has historically been claimable against other income... negative gearing. The May 2026 federal budget changed how that treatment applies to properties purchased after 12 May 2026, with the outcome depending on the type of property bought. What you already owned before that date is not affected. The full picture is in my negative gearing and CGT breakdown... and how it lands for you is, again, your accountant’s call.
If your loans have grown organically into something tangled... one big balance, redraw everywhere... a loan review can map what a clean structure would look like. And if you’re buying your next property, structure-first investment lending is exactly this conversation, had before settlement instead of after.
Deduction questions
Is my investment loan interest tax deductible?
Generally yes, where the borrowed money was used to acquire or run an income-producing property... it’s the purpose of the borrowing that matters, not which property secures the loan. Mixed-purpose borrowing gets apportioned, which is why clean loan splits matter. Your accountant confirms your position.
Can I claim renovations on my investment property?
Not immediately. Improvements are capital... typically claimable slowly as capital works via a depreciation schedule, and relevant to your cost base when you sell. Genuine repairs that restore something damaged by the rental use are deductible in the year you pay them. The boundary is fact-specific... keep records and let your accountant draw the line.
Is stamp duty on an investment property tax deductible?
The stamp duty on purchasing the property is generally not deductible against your income... it forms part of the cost base for capital gains purposes when you eventually sell. Loan-related government charges sit differently... your accountant will classify each cost.
What records should I keep?
Everything, from the contract of sale onwards: loan statements, agent statements, invoices for every repair and improvement, insurance and rates notices, and your depreciation schedule. Capital gains calculations can reach back decades... the investors who keep clean records from day one are the ones who never have to reconstruct them.
