One of the biggest perks of owning an investment property is the range of tax deductions you can claim.
These deductions help reduce your taxable income, making your investment more affordable — especially in the early years.
Here’s the simple breakdown of what you can claim and how it helps.
1. The big one: interest on your loan
The biggest and most common deduction is interest on your investment loan.
If you have a $500,000 loan and pay $25,000 in interest for the year, that interest is tax-deductible.
This is often the largest tax benefit for investors and can significantly reduce your taxable income.
Important: Only the interest, not the principal, is deductible.
2. Ongoing expenses you can claim
You can claim most costs involved in holding and managing your investment property.
Common deductions include:
- Property management fees
- Council rates
- Water charges
- Landlord insurance
- Repairs & maintenance (e.g., fixing a leaking tap or replacing a broken appliance)
- Advertising for tenants
- Body corporate fees
- Accounting fees
- Pest control
- Travel for inspections (in limited cases for commercial arrangements)
These are normal, recurring costs — and almost all of them can be claimed.
3. Depreciation: the tax benefit most investors forget about
Depreciation is one of the most powerful tax deductions, and it’s especially valuable for new homes.
You can claim depreciation on:
- The building structure (capital works)
- Fixtures & fittings (plant & equipment) like flooring, appliances, blinds, hot water systems
- Construction costs
- Renovations done by previous owners
Most investors order a tax depreciation schedule, which outlines every item you can claim over 40 years.
For new builds, this can reduce your taxable income by thousands each year.
4. What you can’t claim
Not everything is deductible. You can’t claim:
- Your deposit
- Stamp duty (usually added to cost base for CGT)
- Loan principal
- Your own labour if you fix things
- Costs before the property is available for rent
Knowing what’s not deductible helps avoid surprises.
5. Why tax benefits matter for investors
Tax deductions don’t make or break an investment — but they do help:
- Reduce your yearly out-of-pocket costs
- Improve your cashflow
- Make new builds more affordable
- Offset rental losses
- Turn a neutral or slightly negative investment into a positive one
For many first-time investors, tax benefits are a key part of making the numbers work early on.
