Evidence-backed. Sourced from the ATO, Budget.gov.au, Treasury, H&R Block, Duo Tax, and independent tax and accounting specialists. General information only — not financial or tax advice. Property investment tax rules are changing — verify your specific situation with a registered tax agent before lodging. Last updated: June 2026.
⚡ Key Takeaways
- Investment property owners can deduct a wide range of expenses against rental income — interest, council and water rates, land tax, repairs, property management fees, insurance, strata, advertising, and depreciation. [8][2][3]
- Depreciation is one of the most powerful deductions — and one of the most commonly missed. A $400,000 building depreciating over 40 years generates $10,000 of deductions per year, purely on paper. A professional depreciation schedule can unlock $5,000–$10,000+ in annual deductions many small landlords don’t even know they’re entitled to. [9][8]
- ATO Draft Ruling TR 2025/D1 (November 2025) targets holiday homes and Airbnbs: full deductions only allowed where the property is genuinely rented at market rates with no private use. Blocking peak periods for owner stays, setting unrealistically high listing prices, or staying for extended periods yourself will trigger ATO denial or apportionment. [13]
- The 2026–27 Budget introduced major reforms from 1 July 2027: negative gearing quarantined for established properties bought after 12 May 2026; the 50% CGT discount replaced by inflation indexation and a minimum 30% tax on capital gains. [1][11]
- The standard $1,000 work deduction does NOT cover investment property expenses — rental and investment costs are still separately claimable under existing rules. [13]
- Small landlords consistently miss bank fees, depreciation, strata levies, and land tax — often only claiming interest and major repairs. [8][3][6]
Property Investment Tax Deductions 2026: Stop Paying More Than You Have To
By The Fine Print editorial team | Last updated: June 2026 | 11 min read | ⚠️ Not financial advice
Australia’s property investment tax system has always rewarded the people who understand it. But it’s rapidly changing — the ATO is closing the Airbnb deduction loophole, the government has quarantined negative gearing on new established-property purchases, and the CGT discount is being rewritten from 2027. If you’re renting a property and still just claiming interest and the obvious repairs, you’re almost certainly leaving money on the table. Here’s exactly what you can and can’t claim in 2026 — and what’s about to change.📋 What’s in This Guide
The Full List of Claimable Deductions in 2026
The ATO allows investment property owners to deduct most genuine rental-related costs against their rental income (and under negative gearing rules, against other income when the property is in a net loss position). Here are the main categories in 2026: [13][2][8][3]Loan interest and borrowing costs
Interest on the loan used to purchase or maintain the investment property is generally deductible in full for properties purchased before 12 May 2026. Loan establishment fees and lenders mortgage insurance can be deducted over five years (or the loan term, whichever is shorter) rather than as a lump sum. Bank fees and account-keeping charges for the investment loan are also claimable — these are commonly overlooked. [8][3][7]Council rates, water rates and land tax
Council rates, water rates and land tax are all deductible against rental income in the year you pay them. Land tax rules and thresholds vary by state — but where you’re paying it on your investment property, it’s claimable. This is another one that small landlords regularly forget to include. [8][3][6]Repairs and maintenance (not improvements)
Repairs that restore a property to its original condition — fixing a broken hot water system, repainting, replacing broken tiles — are immediately deductible. But capital improvements that extend the property’s useful life or upgrade it (adding a new bathroom, replacing an entire kitchen, building a deck) must be depreciated over time rather than immediately deducted. The distinction matters and the ATO is alert to landlords claiming improvements as repairs. [13][8][3]Property management fees and agent commissions
All property management fees paid to a real estate agent — including the ongoing management percentage, letting fees, advertising and re-letting costs — are deductible in full in the year you pay them. [8][3][2]Building and landlord insurance
Landlord insurance (covering loss of rent, building damage, liability), building insurance and contents insurance (for items you provide as landlord) are deductible in full for the year paid. [8][3]Body corporate and strata levies
Strata levies for ongoing administration and maintenance are immediately deductible. However, contributions to the sinking fund (for future capital expenditure) are not deductible as you contribute them — they may create a capital cost base, which is useful at sale time. Check with a tax agent how your specific strata levies are structured. [8][3]Advertising costs
Advertising for tenants — online listings, photography, signage — is deductible in the year of expenditure. [8][3]Depreciation (capital works and plant & equipment)
This is covered in detail in the next section, but it belongs on the core deductions list. Depreciation allows you to claim a non-cash deduction on the building’s structure and on the fixtures and fittings inside it — without spending any additional money. It’s the most powerful and most commonly missed deduction for investment property owners. [9][8]Depreciation — The Most Powerful Deduction Most Landlords Miss
Investment property depreciation comes in two forms: capital works (Division 43) for the building structure itself, and plant and equipment (Division 40) for removable assets like carpet, appliances, air-conditioning units and blinds. Both generate ongoing non-cash deductions — money you get back from the ATO without spending anything that year. [9][8][2]The 2025 Budget lifted the residential building depreciation allowance from 2.5% to 4% per year, meaning a $400,000 building now generates $16,000 per year in capital works deductions rather than $10,000 — a material improvement for landlords holding newer residential properties. [1][9]💡 Why get a depreciation schedule? Duo Tax and other quantity surveying firms estimate a professional depreciation schedule (typically $500–$700 to prepare) can unlock $5,000 to $10,000+ in additional annual deductions for investment properties — making the upfront cost recoverable many times over in the first year’s tax return. The schedule must be prepared by a registered quantity surveyor for the ATO to accept the amounts. It’s also a tax-deductible expense itself. [9]
Note: for second-hand residential properties purchased after 9 May 2017, plant and equipment depreciation can only be claimed if you actually purchased those items — you can’t inherit the previous owner’s depreciation. Capital works (building structure) depreciation remains available regardless of when the property was built. [13][9]What You Cannot Claim
Several costs that look like rental expenses are not immediately deductible. Capital improvements (not repairs) must be depreciated. Purchase costs — stamp duty, conveyancing, legal fees — form part of your cost base for CGT purposes but cannot be deducted against rental income. Travel to inspect your investment property is no longer deductible following law changes in 2017. And if a property is only partially available for rent — due to owner occupation, blocking bookings for personal use, or having a tenant at below-market rent — the ATO will apportion and reduce your deductions accordingly. [13][8][3]⚠️ Standard $1,000 deduction does NOT apply to investment properties. The $1,000 standard work-expense deduction (from 1 July 2026) only covers employment and business expenses. Your rental property interest, management fees, rates, and depreciation are all still fully claimable separately under the existing investment-property deduction rules — this change doesn’t affect them. [13]
The ATO’s Airbnb Crackdown — Draft Ruling TR 2025/D1
In November 2025, the ATO released Draft Ruling TR 2025/D1 — a formal statement of the ATO’s view on when owners of short-term rental and holiday properties can claim full deductions. The ruling is still in draft form, but it signals serious enforcement action against holiday-home tax claims the ATO considers inflated or dishonest. [13]Under TR 2025/D1, full deductions on a holiday property are only allowed where the property is genuinely available for rent on a consistent, commercial basis. The ATO’s high-risk flags include: blocking peak periods so the owner can use the property (a Noosa beach house that’s unavailable for owner-stays every January and Easter is unlikely to get full deductions), setting unrealistically high nightly rates that discourage bookings while the owner holds the property available in name only, and making the property available only to family and friends at discounted rates. [13]⚠️ If you own a holiday property or Airbnb: your records from now on need to clearly show that the property was genuinely rented or available for rent at market rates, and distinguish the periods of owner use from rental periods. The ATO intends to apportion deductions — or deny them entirely — for periods of actual or constructive private use. The draft ruling is expected to be finalised in 2026. [13]
The 2027 Reforms: Negative Gearing and CGT
The 2026–27 Budget announced changes that will fundamentally reshape the property investment tax landscape from 1 July 2027. These are not rumours — they are legislated and budgeted. [1][11][12]Negative gearing quarantined for established properties
From 1 July 2027, net rental losses on established residential properties purchased after 12 May 2026 will be quarantined — meaning you cannot deduct those losses against your wage income. The losses are quarantined until the property becomes positively geared, or until sale (when the quarantined losses reduce your CGT liability). Properties purchased on or before 12 May 2026, and new builds, remain under the current fully-deductible negative gearing regime. [1][11]CGT discount replaced with inflation indexation and a 30% minimum tax
The 50% CGT discount for assets held more than 12 months — a central pillar of the property investment tax system — is being replaced from 1 July 2027. In its place, investors will be able to index the cost base for inflation (reducing the nominal gain), but will face a minimum 30% effective tax rate on any capital gain. The Parliamentary Budget Office estimates this will save the Budget several billion dollars per year by targeting the top tier of property investors for whom the 50% discount produced dramatically reduced effective tax rates. [1][11][15][16]💡 What is NOT changing before 2027: The core property investment deductions — interest, depreciation, rates, management fees, repairs, insurance — remain fully in place for all currently held properties. If you own investment property already, nothing changes for the 2025–26 tax year. The changes apply to how you offset losses and pay CGT on future gains, mostly on established properties acquired after 12 May 2026. Existing properties retain full negative gearing for their lifetime of ownership. [1][11][12]
✅ Three Actions to Take Now
Action 1: Build a complete deductions checklist for each property
Most small landlords build their tax return from their property manager’s annual statement and their loan interest certificate — and miss everything else. For each investment property, set up a spreadsheet tracking: loan interest; bank fees and loan establishment costs; council rates, water rates and land tax; all repairs and maintenance (with dates and descriptions); property management and letting fees; landlord insurance; body corporate and strata levies; advertising; depreciation (from your schedule); and any other directly related costs. Every item on this list is potentially claimable and each one requires documentation to survive an ATO review. [8][3][6][7]Action 2: Get a depreciation schedule if you don’t already have one
If you own a property built after 1985 (for capital works) or have purchased any appliances, carpets or fittings (plant and equipment), you are entitled to ongoing depreciation deductions. If you haven’t had a registered quantity surveyor prepare a depreciation schedule, you’re almost certainly under-claiming. The cost is typically $500–$700 and is itself deductible. Duo Tax and similar firms estimate the average schedule unlocks $5,000–$10,000+ in annual deductions. The schedule can also be backdated to prior years if you haven’t been claiming — ask your tax agent about amending previous returns. [9][8]Action 3: Clean up your holiday-home records before TR 2025/D1 is finalised
If you own a holiday home, beach house or short-term rental property, start keeping records now of every period it was available for rent at market rates, every booking accepted and every period of owner or family use. Review your listing on Airbnb or Stayz: are you blocking peak periods for yourself? Are your nightly rates competitive, or set high to discourage bookings you don’t want? If the ATO finalises TR 2025/D1 as drafted, these are exactly the facts they will ask about. Fixing your records and your listing structure now is much easier than trying to reconstruct them under audit. [13]❓ Frequently Asked Questions
What can I claim on an investment property in 2026?
Loan interest, bank fees, council and water rates, land tax, repairs (not improvements), property management fees, landlord insurance, body-corp and strata levies, advertising, and depreciation. The standard $1,000 work deduction doesn’t affect these — rental costs remain separately claimable in full. [8][3][13]Is negative gearing still allowed in 2026?
Yes — for all properties purchased on or before 12 May 2026 and all new builds. From 1 July 2027, net losses on established residential properties purchased after 12 May 2026 will be quarantined — offsettable only against future rental income or capital gains, not wages. [1][11]What is ATO Draft Ruling TR 2025/D1?
Released in November 2025, it sets out the ATO’s view on holiday-home and short-term rental deductions: full deductions require genuine availability for rent at market rates, no private use, and realistic pricing. Blocking peak periods for owner stays or inflating listing prices to discourage bookings are red flags for denial or apportionment. [13]How much can depreciation save me?
A $400,000 building at the new 4% rate generates $16,000 in annual capital works deductions — non-cash, no extra spending required. Most landlords without a depreciation schedule miss $5,000–$10,000+ per year in legitimate deductions. A schedule costs ~$500–$700 and is tax-deductible. [9][1]⚖️ The Fine Print Verdict
Most property investors are not tax minimisers — they’re just bad at paperwork. They claim the loan interest because the bank gives them a statement, and they stop there. The landlords winning at tax are keeping full records, getting depreciation schedules, and treating every claimable cost as exactly that: claimable. The system is still generous — even under the 2027 reforms — for people who hold long-term and document properly. But the Airbnb holiday-home rort is closing, the CGT free kick is shrinking, and the ATO’s data matching is getting better every year. The time to get your records right is before the ATO asks for them.
👉 Build the checklist. Get the depreciation schedule. Clean up the holiday-home records. Do it once — it pays every tax year until you sell.
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- Australian Government, Federal Budget 2026–27 factsheet — housing and investment tax reforms. budget.gov.au
- H&R Block, “Rental property tax deductions 2026,” hrblock.com.au
- Lagos Financial, “Complete list of property investment deductions,” lagosfinancial.com.au
- Reuters, “Australia housing taxes 2025–26,” reuters.com
- Baron Accounting, “Property investor tax deductions Australia,” baronaccounting.com.au
- Search Property, “Investment property tax deductions guide,” searchproperty.com.au
- JMD Mortgages, “Investment property deductions,” jmdmortgages.com.au
- Nanak Accountants, “Property investment tax deductions Australia 2026,” nanakaccountants.com.au
- Duo Tax, “Depreciation schedule for investment property,” duotax.com.au
- ABC Radio National, “Property tax reform and the 2026 budget,” abc.net.au/radionational
- Treasury, “Negative gearing reform 2026,” treasury.gov.au
- Budget.gov.au, “Housing investment tax changes,” budget.gov.au
- ATO, “Rental properties — deductions and Draft Ruling TR 2025/D1 (November 2025),” ato.gov.au
- Picki, “Investment property tax deductions,” picki.com.au
- Parliamentary Budget Office, “CGT discount revenue estimates 2026,” pbo.gov.au
- The Guardian Australia, “Australia housing tax reform 2026,” theguardian.com/australia
- NAB, “Property investment guide,” nab.com.au
This article is general information only and does not constitute financial or tax advice. Property investment tax rules are changing from 1 July 2027 — always verify your specific situation with a registered tax agent before lodging. The Fine Print 🇦🇺 is not affiliated with the ATO or any accounting firm.