Property Investment Tax Deductions Australia 2026: Complete List

Immediately deductible expenses

These expenses are deductible in the financial year they are incurred:

• Mortgage interest (for grandfathered properties and new builds — quarantined for post-Budget-night established properties from 1 July 2027)
• Property management fees (typically 7–10% of rent)
• Council rates and water rates
• Landlord insurance and building insurance
• Repairs and maintenance (restoring property to original condition)
• Pest control and cleaning
• Advertising for tenants
• Accounting and tax agent fees (for rental property income)
• Legal fees for lease disputes or evictions
• Land tax (for investment properties in most states)
• Body corporate / strata levies
• Depreciation on plant and equipment (for assets purchased before 9 May 2017, or new properties)

Deductible over time (capital works)

Capital works deductions (Division 43) cover structural improvements at 2.5% per annum over 40 years from completion. This includes construction costs, extensions, alterations, and structural renovations. You need a quantity surveyor's report to claim these accurately.

NOT deductible — goes in the cost base instead

These costs are not immediately deductible but are added to your cost base, reducing your capital gain when you sell:

• Purchase price
• Stamp duty
• Legal fees for the purchase
• Buyer's agent fee
• Building and pest inspection (pre-purchase)
• Capital improvements (new kitchen, bathroom renovation, extension, pool)
• Loan establishment fees

Depreciation: the most underutilised deduction

Depreciation on plant and equipment (Division 40) covers items like appliances, carpet, blinds, hot water systems, and air conditioning. A quantity surveyor's depreciation schedule identifies all eligible items and their depreciation rates.

For new properties or properties purchased before 9 May 2017, this can be worth $5,000–$15,000 per year in additional deductions. For established properties purchased after 9 May 2017, second-hand plant and equipment depreciation is generally not available.

What changed in the 2026 Budget

From 1 July 2027, for established residential investment properties purchased after Budget night (12 May 2026), rental losses (including mortgage interest) are quarantined — they can only be offset against other residential property income, not against salary or other income. Grandfathered properties and new builds are not affected.

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