Rental property deductions are where most landlords either leave money on the table or claim something the ATO will take back. The difference usually comes down to three questions: was the property rented or genuinely available, is the cost a running expense or a capital one, and was any of it private.
This guide is our definitive list of rental property deductions for 2025-26 returns, which are being lodged now, and for the 2026-27 income year. It covers apportionment, holiday homes and vacant land, and every rule was checked against the ATO’s Rental properties guide 2026 and its rental expenses pages.
It is written for individual investors with one or more residential rentals. If you want to understand when each cost is claimed, our guide to rental property tax deductions: claim now vs over time walks through the timing rules in detail.
Key takeaways
- You can claim expenses only while the property is rented or genuinely available for rent on commercial terms.
- Interest, rates, land tax, insurance, agent fees and repairs are claimed in the year incurred.
- Borrowing expenses over $100 are spread over 5 years or the loan term; capital works generally at 2.5% a year over 40 years.
- Travel to a residential rental is not deductible for most individuals since 1 July 2017.
- Holiday home ownership costs are deductible only if the home is mainly used to produce rent.
- Vacant land holding costs incurred from 1 July 2019 are generally not deductible.
Rental property deductions at a glance
| Deduction | When claimed | Watch for |
|---|---|---|
| Loan interest | Year incurred | Remove interest on private redraws |
| Council rates, water charges, land tax | Year incurred | Apportion for private use or part-year rental |
| Insurance (building, contents, landlord, loss of rent) | Year incurred | Prepayments over $1,000 may need spreading |
| Agent fees, advertising, cleaning, gardening, pest control | Year incurred | Rent-only costs are not apportioned |
| Repairs and maintenance | Year incurred | Not initial repairs or improvements |
| Body corporate administration fees | Year incurred | Special levies for capital works are not deductible |
| Borrowing expenses | Over 5 years or loan term if over $100 | Mortgage stamp duty counts; transfer duty does not |
| Capital works | Generally 2.5% a year over 40 years | Only once construction is complete |
| Depreciating assets | Over effective life | Second-hand assets in residential rentals mostly excluded |
Source: ATO common property expenses, borrowing expenses, capital expenses and depreciating assets in rental properties, checked 9 October 2026.
What makes a rental expense deductible?
The expense must relate to earning rent from the property, it must not be capital or private, and you must be able to prove it. The property has to be rented, or genuinely available for rent, during the period you claim for. The ATO expects evidence, such as correspondence with your agent and advertising at a market rent.
Keep records for 5 years from the date you lodge the return, as the ATO’s records you need to keep page explains. For costs that go into the CGT cost base, keep them until 5 years after you sell.
What rental property deductions can you claim this year?
The ATO’s common property expenses list covers the costs most landlords claim each year:
- Interest on the loan used for the rental property.
- Council rates, water charges and land tax. See our guide to land tax on investment property for thresholds by state.
- Insurance: building, contents, public liability and loss of rent.
- Property agent fees and commissions, plus advertising for tenants.
- Body corporate administration fund fees.
- Cleaning, gardening, lawn mowing and pest control.
- Repairs and maintenance for damage or wear while the property is rented.
- Certain legal expenses connected with earning the rent (purchase legal fees are capital).
Prepaid expenses under $1,000 can generally be claimed immediately, and larger ones too where the service period is 12 months or less and ends in the next income year.
What do you claim over several years?
Borrowing expenses
Loan establishment fees, lender’s mortgage insurance billed by the lender, valuation fees for the loan, broker fees and stamp duty on the mortgage are borrowing expenses. If they total more than $100, spread them over 5 years or the loan term, whichever is shorter.
Capital works and depreciation
Structural work such as extensions, renovations, fences and driveways is claimed as capital works, generally at 2.5% a year over 40 years once complete. Our capital allowances and capital works service and capital works deduction guide cover the detail.
Plant that is not part of the structure, such as carpets, curtains and appliances, is claimed over its effective life. The ATO’s depreciating assets in rental properties page says that in most cases you cannot claim second-hand depreciating assets after 1 July 2017, unless you are carrying on a rental business or are an excluded entity.
How does apportionment work?
You must apportion when the property is rented for only part of the year, used privately, partly rented, rented below market rate to family or friends, or financed by a loan partly used for private purposes. The ATO’s how to claim rental expenses page sets out the methods:
| Situation | ATO method | Notes |
|---|---|---|
| Rented for part of the year | Days rented or available / days in year x expense | Days only count if available on commercial terms |
| Only part of the home rented | Tenant-only area plus half of shared area / total area | Can be combined with the time method |
| Rented to family below market rate | Deductions limited to rent received | No net rental income or loss |
| Loan partly private | Rental share of loan / total loan x interest | Applies to borrowing expenses too |
| Costs that relate only to renting | No apportionment | Agent commissions, tenant advertising |
What about holiday homes and short-stay rentals?
For a holiday home, ownership and use expenses such as interest, rates, land tax, insurance and repairs are deductible only if the property is mainly used, or held for use, to produce rent. The ATO’s holiday homes page says main use is assessed each income year, looking at actual use, private use by you and family, and whether it is available during peak periods such as school holidays.
If the home is not mainly used for rent, the rent is still taxable, but you can claim only costs that relate to renting, such as platform commissions, advertising and cleaning after guests. The ATO’s new TR 2026/1 and PCG 2026/2 and 2026/3 set out its current views on rental deductions, apportionment and holiday homes.
Can you claim costs on vacant land?
Generally not for costs incurred on or after 1 July 2019. The ATO’s deductions for vacant land page says interest, land tax, council rates and maintenance on vacant land are not deductible, although they can be added to the cost base. Land with a new home being built stays vacant until the home can lawfully be occupied and is rented or available for rent.
Exceptions include land used in a business, land leased at arm’s length to a business with no residence on it, and excluded entities such as companies.
What can you never claim?
- Purchase costs such as transfer stamp duty and conveyancing, which go into the cost base for capital gains tax.
- Principal repayments on the loan.
- Travel to inspect, maintain or collect rent from a residential rental, under the ATO’s travel expenses rule from 1 July 2017.
- Initial repairs for defects that existed when you bought the property.
- Costs for private-use periods, including weeks you or family stay at the property.
Worked example: a holiday unit that is mainly rented
Jess owns a coastal unit listed on a short-stay platform. It was rented or available for 48 weeks of 2025-26, including school holidays, and she used it privately for 4 weeks in the off-season. Rent received: $30,000.
Ownership expenses: interest $15,000 + council rates $2,000 + insurance $1,200 + repairs $800 = $19,000. Apportioned: $19,000 x 48 / 52 = $17,538.46.
Rent-only expenses, not apportioned: platform commission $3,000 + cleaning between guests $2,400 = $5,400.
Total deductions: $17,538.46 + $5,400 = $22,938.46. Net rental income: $30,000 – $22,938.46 = $7,061.54.
Jess’s other income is $95,000, so the extra income is taxed at 30% plus 2% Medicare levy under the 2025-26 resident tax rates: $7,061.54 x 32% = $2,259.69.
Rule of thumb: Ask two questions for every cost: was the property earning or genuinely available to earn rent at the time, and does this cost keep it running or make it better? Running costs in rented periods are claimed now; anything that makes it better is claimed over time.
Common mistakes with rental property deductions
- Claiming the full year for a part-year rental. Apportion by days rented or genuinely available.
- Treating renovations as repairs. Improvements are capital works.
- Claiming private redraw interest. Only the rental share of the loan counts.
- Claiming holiday home costs without the main-use test. Heavy private use in peak periods can remove ownership deductions entirely.
- Leaving out short-stay income. Rent from platforms is assessable, just like long-term rent.
FAQ about rental property deductions
Can I claim interest on my investment property loan?
Yes, for the part of the loan used to buy, build or maintain the rental, and only while the property is rented or genuinely available for rent. Principal repayments are never deductible. If you redraw money for private spending such as a car or holiday, the interest on that portion becomes private and must be removed from your claim.
Can I claim expenses while my rental is empty?
Yes, if it is genuinely available for rent on commercial terms. The ATO expects evidence, such as an agency agreement, current advertising at a market rent and a property in a condition tenants would accept. Days when the property sits empty but is not advertised or managed as a rental do not count as days held to produce income.
Can I claim travel to inspect my rental property?
Generally, no. Since 1 July 2017 individuals cannot claim travel costs relating to a residential rental property. The exceptions are investors carrying on a business of letting properties and excluded entities such as companies, public unit trusts, managed investment trusts and non-SMSF super funds. Owning one or a few rentals is usually an investment, not a business.
Can I claim deductions on my holiday home?
Only some. Interest, rates, insurance, land tax and repairs are deductible only if the home is mainly used or held to produce rent, and even then you apportion for private use. Costs that relate only to renting, such as platform commissions, advertising and cleaning after guests, are deductible to the extent they produce rent regardless of the main-use test.
Can I claim holding costs on vacant land?
Usually not. Interest, land tax, council rates and maintenance on vacant land incurred on or after 1 July 2019 are generally not deductible, though they can be added to the land’s cost base for CGT. Exceptions include land used in a business, certain arm’s length leases and excluded entities such as companies. The rule ends once a new home can lawfully be occupied and is rented or available.
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Nanak Accountants can prepare your rental schedule, apportion holiday home and part-year costs, and check that capital items are claimed over the right period. If your rental runs at a loss, see our negative gearing guide. Call 1300 626 258, book a free 15-minute consultation or visit the Nanak Accountants website. For earlier years, the ATO’s Rental properties guide 2024 is still available.
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 and the ATO pages on common property expenses, borrowing expenses, capital expenses, depreciating assets, how to claim rental expenses, holiday homes, vacant land, travel expenses, records and resident tax rates on 9 October 2026. Rates and thresholds change, so confirm the current position before acting.
