How investment property tax work is usually handled
The process starts with a short discovery and document check: title and ownership %s, loan statements, property manager summaries, lease details, insurance, prior tax returns and any quantity surveyor (QS) depreciation schedules.
We then complete your rental schedule, ensure expenses are categorised correctly, and apply the right rules for depreciation (Division 40) and capital works (Division 43). Where useful, we model a PAYG withholding variation to improve cash flow for negatively geared investors.
Finally, we plan ahead for sale events. That includes keeping strong records for CGT, modelling likely outcomes (50% discount eligibility, cost base adjustments and selling costs), and timing guidance to avoid surprises.
Australian rules to keep front of mind
- Negative gearing can create a deductible rental loss, but keep loan splits clean and interest traceable to the investment portion.
- Repairs vs improvements: repairs restore existing condition and are generally deductible; improvements are capital and usually claimed over time (Div 43) or on disposal via CGT cost base.
- Second‑hand residential assets: from 9 May 2017 most individual investors cannot claim decline in value on used plant they did not purchase new; capital works are unaffected.
- Travel to inspect or maintain residential rentals is generally not deductible for most individuals since 1 July 2017.
- Residential rent is input‑taxed for GST (you do not charge GST and cannot claim credits). Commercial residential premises have different rules.
- Holiday homes and short‑stay rentals must apportion deductions for private use and for periods not genuinely available for rent.
- State land tax thresholds and surcharges vary, particularly for trusts and foreign owners—factor this into holding costs.
What to compare before you choose a provider
Scope
Confirm the engagement covers rental schedule prep, deduction review, depreciation/capital works, PAYG variation (if relevant), and CGT forecasting before sale.
Experience
Ask about recent work with long‑term rentals, short‑stay/Airbnb, multi‑property portfolios, and trust/company ownership.
Turnaround and communication
Agree on data handover (property manager statements, loan files, QS schedule), review timings and how questions are handled at tax time.
Commercial fit
Compare fixed vs hourly pricing, what’s included, and whether proactive planning (e.g. CGT timing, structure review) is part of the service.
Key deductions and common traps
- Interest deductibility depends on use of funds, not the security. Redraws for private purposes reduce deductible interest—consider loan splits.
- Borrowing expenses (including LMI) over $100 are spread over the lesser of 5 years or the loan term; $100 or less is immediately deductible.
- Body corporate special levies that fund capital works are capital, not immediately deductible.
- Apportion expenses where there is private use or where only part of the property is rented.
- Keep QS schedules up to date for renovations and new builds so you don’t leave Div 40/43 deductions unclaimed.
- Data matching is extensive (Airbnb/Stayz, state bond authorities, land titles). Accurate records prevent ATO review friction.
Selling a property: CGT basics
Before you sign a contract, model the after‑tax outcome. Consider eligibility for the 50% CGT discount (12+ months and residency), timing across financial years, selling costs, and how prior capital works claims affect the cost base. Foreign resident CGT withholding can apply to sellers without a clearance certificate above the legislated threshold.
If you ever lived in the property, main residence and absence rules may change the result. Timing and documentation matter.
Short‑stay rentals and holiday homes
Short‑term listings require careful apportionment. Deductions must reflect genuine availability for rent and exclude private stays. Many short‑stay arrangements are still residential for GST (input‑taxed), but commercial residential premises have different GST treatment.
Best next steps
Gather your documents (loan statements, manager summaries, invoices and any QS report) and decide your goal: optimise current-year deductions, improve cash flow with a PAYG variation, or plan a sale with CGT modelling.
If your needs are broader than property, use our Tax Accountant hub or head straight to Capital Gains Tax Help for sale planning. If you’re weighing options, see our comparison pages or browse common questions in the help centre.
Frequently asked questions
What rental property expenses are deductible?
Typically: interest, council rates, body corporate fees, property management, landlord insurance, repairs and maintenance (not improvements), advertising for tenants, utilities you pay, cleaning, garden care, pest control, bank fees, accounting fees, land tax, borrowing costs (e.g. LMI over time), and eligible depreciation/capital works. Keep clear records and apportion for private use.
Can I claim depreciation on a second‑hand residential property?
Capital works (Div 43) can still apply, but plant and equipment (Div 40) is restricted for second‑hand assets acquired after 9 May 2017 by most individual investors. A QS schedule helps identify what you can legally claim.
Is travel to my rental deductible?
Generally no for residential properties since 1 July 2017 (exceptions apply for certain entities and business‑scale operations).
Do I need to charge GST on rent?
Residential rent is input‑taxed—you don’t charge GST and can’t claim credits. Commercial residential premises have different rules.
What is a PAYG withholding variation?
It’s an ATO arrangement that lets employees reduce tax withheld during the year when they expect a rental loss, improving cash flow instead of waiting for a refund.
How do I prepare for selling an investment property?
Model CGT before listing, confirm 12‑month discount eligibility, collect cost base documents and selling costs, and plan timing across financial years. Get advice before signing a contract.