Council rates are one of the few property bills almost every owner pays. Whether you can claim them on your tax return comes down to one question: is the property used, or held for use, to earn income?
This guide explains when council rates are deductible for the 2025-26 and 2026-27 income years: rental properties, your own home, home-based businesses, vacant land, holiday homes and special levies. Every rule was checked against the ATO rental properties guide 2026 and the ATO occupancy expense pages.
It is for property investors, home owners and people running a business from home. If you are also paying land tax, our guide to land tax vs council rates explains how the two charges differ.
Key takeaways
- Council rates on a rental property are deductible for the period it is rented or held for use to earn rent.
- Rates on your own home are a private expense and not deductible.
- A home-based business can claim a share only if part of the home is a genuine place of business.
- Rates on vacant land are generally not deductible for individuals since 1 July 2019.
- A special levy for a capital improvement is not deductible as a running cost.
Council rates deductibility at a glance
| Property | Are council rates deductible? | ATO basis |
|---|---|---|
| Rental property | Yes, for the period rented or held for rent | Rental properties guide 2026 |
| Your own home | No | Private expense |
| Home with a place of business | Business share only (floor area and time) | Home-based business expenses |
| Employee working from home | Generally no | Occupancy expenses |
| Vacant land held by an individual | Generally no since 1 July 2019 | Vacant land rules |
| Holiday home not mainly rented | No | Rental properties guide 2026 |
Source: ATO rental properties guide 2026: rental expenses, ATO occupancy expenses, ATO deductions for vacant land, checked 7 October 2026.
Are council rates deductible on a rental property?
Yes. The ATO says you can claim a deduction for local government rates and levies for the period your property is used, or held for use, to produce rental income. Rates are an immediate deduction in the year you incur them, alongside water charges, land tax, insurance and interest. See the ATO rental expenses pages.
You can also claim rates incurred before the first tenant moves in, if you are holding the property to produce rental income. The ATO lists interest, council rates, water and sewerage charges, land taxes and emergency service levies incurred before you use the property as claimable on that basis. Vacant land is treated differently, as explained below.
For the full list of landlord deductions, see our rental property deductions guide and our earlier article on what deductions rental property owners can claim.
Can you claim council rates on your own home?
No. Rates on the home you live in are a private expense. Working from home does not change this for most people. Council and water rates are occupancy expenses, and the ATO says employees generally cannot claim occupancy expenses.
Employees can only claim them where their work requires a place of business, the employer does not provide one, and the area is used exclusively or almost exclusively for work. That situation is rare. Read the ATO occupancy expenses page and our home office deductions guide.
What if you run a business from home?
A sole trader or partnership can claim a share of council rates if an area of the home is a place of business. The ATO home-based business page says signs of this include the area being clearly identifiable as a place of business, not readily suitable for private use, used exclusively or almost exclusively for the business, and regularly visited by clients.
The claim is apportioned by the floor area used as a place of business and the part of the year it was used. There is a trade-off: if part of your home is set aside as a place of business, you may pay CGT on part of the gain when you sell, even if you did not claim interest.
How do you apportion council rates?
You only claim rates for the part of the property and the part of the year that relate to earning income. The two common bases are:
- Time: the days in the income year the property was rented or genuinely available for rent.
- Area: the share of the floor area used to earn income, such as a rented room or a home business area.
| Situation | How to apportion |
|---|---|
| Bought mid-year and listed for rent straight away | Days from settlement to 30 June |
| Lived in it, then moved out and rented it | Days rented or available for rent |
| Rented one room in your home | Floor area of the room plus a share of common areas, for the period rented |
| Holiday home used by family part of the year | Only if mainly held to earn rent, then rented or available days |
Can you claim council rates on vacant land?
Generally not, if you are an individual or a family trust. Since 1 July 2019, the holding costs of vacant land are not deductible unless an exception applies, and the ATO lists council rates among those costs. The ATO vacant land page explains the exceptions, and our guide to claiming interest on a land loan works through the construction period.
Rates you cannot deduct may be included in the cost base of the land, which reduces any capital gain when you sell.
Are special levies and strata fees treated the same?
Not always. Regular body corporate payments for administration and general maintenance are deductible. The ATO says that if the body corporate requires you to pay a special levy to fund a particular capital improvement, that levy is not deductible. Our guide to capital allowances and capital works for rental property explains how capital costs are treated instead.
Rates are one of the ways councils pay for local services. If you want the bigger picture, the ABS publishes government finance statistics on how each level of government is funded.
Worked example: a rental bought part way through the year
Sarah settles on an investment unit on 1 October 2025 and lists it for rent that day. A tenant moves in on 15 October. The council rates for 2025-26 are $2,400.
Days available for rent: 1 October 2025 to 30 June 2026 = 31 + 30 + 31 + 31 + 28 + 31 + 30 + 31 + 30 = 273 days.
Deductible rates: $2,400 x 273 / 365 = $1,795.
The settlement statement shows the rates adjustment with the seller, so Sarah keeps it with her rates notice to support the claim. If the same unit had been a vacant block, the rates would generally not be deductible at all.
Rule of thumb: If the property earned rent or was genuinely available for rent, claim the rates for those days; if you lived in it or it is vacant land, assume no deduction unless an exception clearly applies.
Common mistakes with council rates
- Claiming rates on your home: they are private unless part of the home is a genuine place of business.
- Claiming a full year for a part-year rental: apportion to the days rented or available.
- Claiming rates on vacant land: generally not deductible for individuals since 1 July 2019.
- Deducting a capital special levy: levies for a particular capital improvement are not deductible.
- Losing the paperwork: keep rates notices, payment records and settlement statements. If something is missing, see our guide to claiming deductions without receipts.
FAQ about claiming council rates
Can I claim council rates on vacant land?
Usually not, if you are an individual. Since 1 July 2019, holding costs for vacant land, including council rates, interest and land tax, are generally not deductible unless an exception applies, such as business use or the land having a completed home that can lawfully be occupied and is leased or available for lease. Costs you cannot claim may be added to the cost base.
Can I claim council rates on my home if I work from home?
Generally no. Council rates are an occupancy expense, and most employees cannot claim occupancy expenses. You can only claim them if part of your home is a genuine place of business, such as an area used exclusively for the business and not easily adapted for private use. Claiming them can affect your main residence CGT exemption.
Are council water charges deductible for a rental?
Yes. The ATO rental properties guide lists water charges among the expenses you can claim immediately for a rental property. As with council rates, you claim them for the period the property is rented or held for use to produce rental income, and you apportion them if the property is also used privately during the year.
Can I claim council rates on a holiday home?
Only if it is mainly used or held for use to produce rental income. The ATO says that if your holiday home is not mainly used for that purpose, you cannot claim any ownership or use expenses. Where it does qualify, you claim rates only for the periods it was rented or genuinely available for rent.
Can I claim council rates paid before my first tenant moves in?
Yes, if you are holding an existing property to produce rental income. The ATO allows rates, water and sewerage charges, land tax and interest incurred before the property is first rented, provided you hold it to produce assessable rental income. Vacant land is the exception and is covered by separate rules.
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Council rates are simple to claim once the property use is clear, but mixed-use homes, vacant land and part-year rentals need care. Nanak Accountants can review your property use, apportion each expense and prepare your rental schedule. Call 1300 626 258 to book a consultation.
This article is general information only and is not personal tax or legal advice. Figures and rules were checked against the ATO rental properties guide 2026, occupancy expenses, home-based business expenses and vacant land pages on 7 October 2026. Rates and thresholds change, so confirm the current position before acting.
