If you lodge your own return, your 2025-26 rental figures are due by 31 October 2026, and because that falls on a Saturday this year the ATO accepts it on the next business day, Monday 2 November. Investment property tax deductions sort into three buckets: costs you claim in full this year (interest, rates, insurance, agent fees, genuine repairs), costs you claim over several years (borrowing expenses, depreciating assets, capital works), and costs you cannot deduct at all (travel to the property, stamp duty on the purchase, initial repairs, and fittings that came with a property bought after 9 May 2017).
Most mistakes happen at the border between the first two buckets. In 2024 the ATO estimated that incorrectly reported interest makes up 42% of the $1.2 billion tax gap it attributes to individual rental property owners, and calls repairs versus capital improvements the most common error.
Deadlines for the 2025-26 return
When 31 October falls on a weekend, the due date moves to the next business day. To use a tax agent's later dates, be on their books before 31 October.
| Your situation | Lodgment due date |
|---|---|
| Lodging yourself | Monday 2 November 2026 |
| With an agent, one or more prior-year returns outstanding at 30 June 2026 | 31 October 2026 |
| With an agent, latest return showed a tax liability of $20,000 or more | 31 March 2027 |
| With an agent, most other individuals | 15 May 2027, or 5 June 2027 if any tax owing is also paid by then |
The negative gearing changes do not touch this return
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026, so the Budget's negative gearing and capital gains changes are law, but they start on 1 July 2027 and the ATO lists both among the changes that do not apply this tax time. For 2025-26, a rental loss offsets your wages and other income, whenever you bought.
From 1 July 2027, an established property bought from 7:30pm AEST on 12 May 2026 can only offset its losses against residential property income, including capital gains, with the excess carried forward. Properties held at that moment keep full negative gearing until sold, and new builds keep it regardless. Our explainer on the 2026 negative gearing and CGT changes predates the bill passing; the mechanics it describes are now legislated.
Investment property tax deductions you claim in full this year
These are deductible in the year you incur them, provided the property is rented or genuinely available for rent on commercial terms, and you paid them rather than the tenant:
- Interest on the loan used to buy the property, and on loans for its repairs or renovations.
- Council rates, water service charges and land tax. Land tax varies enormously by state, as our land tax guide shows.
- Strata levies to the administration fund or general sinking fund.
- Insurance, agent fees and advertising for tenants.
- Repairs and maintenance, cleaning, gardening and pest control.
- Quantity surveyor's fees, bookkeeping and bank charges.
Interest is where the money goes wrong
You can only claim interest on borrowings used for the rental. The ATO's illustration: redraw $50,000 from an $800,000 investment loan for the family car, and you claim interest on $800,000, not $850,000. Paying the $50,000 back later does not fix it, because repayments are apportioned between the private and investment parts for the life of the loan. If you need to borrow for anything private, a mortgage broker can set it up as a separate split.
Check the property manager's statement too. If the manager paid a repair out of the rent, claim it once, not again from the invoice.
Repair, improvement or initial repair?
A repair restores something worn or damaged through renting: broken roof tiles, an air conditioner that stopped working, faded paint. Claim it now.
An improvement makes the property better than it was: a new kitchen or bathroom, landscaping, insulation. Replacing an entire item, such as a complete fence or a stove, is also capital. These go to capital works or depreciation.
Initial repairs fix defects that existed when you bought. In the ATO's example, repainting dirty walls and treating white ants before the first tenant moved in were not deductible; they go into the cost base instead.
The lines can surprise. A storm-damaged roof replaced with slightly better modern tiles is a repair. A replaced toilet is capital works, while replastering the wall around it is a repair, so ask for itemised invoices.
Deductions you spread over several years
Borrowing expenses
Loan establishment fees, lender's mortgage insurance, title search, broker and valuation fees, and stamp duty on the mortgage are borrowing expenses. Over $100 in total, you claim them over five years from the day the loan started, or the loan term if shorter. Pay the loan out early and you claim the balance that year.
Capital works (Division 43)
You deduct the cost of constructing the building, not the price you paid, and never the land. For residential construction started after 15 September 1987, the rate is 2.5% a year for 40 years. The 4% rate applies to eligible build-to-rent developments started after 9 May 2023, and to residential construction started between 18 July 1985 and 15 September 1987. Residential construction started before 18 July 1985 gets nothing.
If you do not know the construction cost, the ATO accepts an estimate from a quantity surveyor or similarly qualified person, but generally not from valuers, agents or accountants. Capital works you claim come off your cost base when you sell.
Plant and equipment (Division 40) and the 2017 rule
Ovens, dishwashers, blinds and hot water systems decline in value over their effective life. An item costing $300 or less is deducted in full, and items under $1,000 can go into a low-value pool, written off at 18.75% in the first year and 37.5% after.
The trap is the 9 May 2017 rule. If you bought a residential rental after 7:30pm on that date, you cannot claim decline in value on assets already in it, or on assets you used in your own home before renting it out. New assets you install are still claimable, as is plant in a brand-new property bought from a developer where no one lived there first (or you bought within six months of completion) and no one claimed it before you.
If you went looking for an investment property tax deductions calculator, depreciation is the part worth modelling, because it is the one large deduction you cannot read off a statement. Our property depreciation calculator shows whether a quantity surveyor's schedule is worth paying for.
What you can and cannot claim
| Expense | 2025-26 treatment |
|---|---|
| Interest (investment portion), rates, land tax, strata admin and sinking fund levies, insurance, agent fees, repairs from wear, quantity surveyor's report | Claim now |
| Special strata levy for a capital improvement | Not deductible; capital works once completed |
| Borrowing expenses over $100 | Over five years, or the loan term if shorter |
| Building construction cost | Capital works, usually 2.5% a year |
| New plant you buy | Over its effective life; $300 or less in full |
| Fittings that came with a property bought after 9 May 2017 | Not deductible |
| Initial repairs and renovations | Not deductible now; cost base or capital works |
| Stamp duty on the transfer, conveyancing, buyer's agent fee | Not deductible; cost base |
| Travel to inspect, maintain or collect rent | Not deductible |
| Loan principal repayments | Not deductible |
| Holding costs for vacant land | Not deductible, with narrow exceptions |
Three rows catch people every year.
Travel. Individuals not in business cannot deduct travel to inspect, maintain or collect rent from a residential rental, and the cost cannot go into the cost base either.
Vacant land. Holding costs on vacant land are generally not deductible, including land with a house under construction or finished but not yet able to be lawfully occupied or offered for rent. The exceptions cover business use, companies and similar entities, and land left vacant by a natural disaster.
Buying costs. Stamp duty on the transfer, conveyancing and a buyer's agent fee for finding the property go into the cost base instead, reducing your capital gain when you sell.
Part-year rentals, family and holiday homes
If the property was rented for part of the year, claim expenses for the days it was rented or genuinely available for rent. Rent it to family below market rate and the ATO caps your deductions at the rent you receive.
Holiday homes got new rules this year. On 20 May 2026 the ATO issued Taxation Ruling TR 2026/1 with two practical compliance guidelines, PCG 2026/2 on apportionment and PCG 2026/3 on holiday homes. If a holiday home is not used or held mainly to earn rent, you lose interest, rates, strata, repairs, capital works and decline in value; only costs such as advertising, cleaning after guests and booking fees survive. The ATO will not apply compliance resources to expenses incurred before 1 July 2026, so the rule bites from 2026-27, but you still remove your private-use days this year. Our short-stay rules guide covers the state levies on top.
Worked example: a $720,000 unit
Say you bought a two-bedroom unit for $720,000 in 2021 with a $576,000 interest-only loan. It was built in 2012, and a quantity surveyor put the construction cost at $240,000. In 2025-26 it was let at $650 a week for 50 weeks, vacant and advertised for the other two. You earn a $120,000 salary. All figures are hypothetical.
| Item | Amount |
|---|---|
| Rent received | $32,500 |
| Interest | $34,560 |
| Strata levies | $4,200 |
| Council rates and water service charges | $2,550 |
| Landlord insurance | $480 |
| Management and letting fees | $3,150 |
| Repairs (leaking tap, oven element) | $620 |
| New $950 dishwasher, low-value pool at 18.75% | $178 |
| Borrowing expenses, one-fifth of $1,800 | $360 |
| Capital works, 2.5% of $240,000 | $6,000 |
| Carpets and blinds that came with the unit | $0 |
| Flights to check on the unit | $0 |
| Total deductions | $52,098 |
| Net rental loss | $19,598 |
The loss takes your taxable income from $120,000 to $100,402. At 2025-26 resident rates plus the 2% Medicare levy, your tax falls by about $6,271.
$6,360 of those deductions (capital works and the borrowing instalment) involved no cash leaving your account this year. Without the quantity surveyor's figure, the tax reduction would be about $4,351, so that report is worth roughly $1,920 a year at a 32% combined rate. The carpets and blinds are worth nothing because they were second-hand in 2021. To see what this does to your overall return, use the investment return calculator.
Bought in 2021, this unit is untouched by the 2027 changes. Had you bought it in August 2026, the 2026-27 loss would still offset your salary, but from 1 July 2027 it could only offset residential property income, with the rest carried forward.
What the ATO is checking this year
The ATO's Tax Time 2026 focus areas, announced on 27 April 2026, are work-related deductions and omitted income, rental income included. It cross-checks rental returns against data from banks, land title offices, insurers, property managers and sharing platforms, and in June 2024 said most rental owners were making errors even though 86% used a registered tax agent.
Records to keep before you lodge
- Loan statements showing any redraws and what they paid for.
- The property manager's annual and monthly statements.
- Itemised invoices for every repair.
- Rates, water, strata and land tax notices, and insurance certificates.
- Your depreciation schedule or construction cost evidence.
- Purchase contract, settlement statement, stamp duty and conveyancing invoices.
- A log of days rented, advertised, vacant or used privately.
Keep rental records for five years from 31 October, or from when you lodge if later. Cost base records last as long as you own the property, plus five years after you sell.
Frequently asked questions
Can I claim travel to inspect my investment property?
No, not as an individual investor. Travel relating to a residential rental is only deductible if you carry on a business of letting properties or are an excluded entity such as a company, and it cannot go into your cost base either.
Can I claim depreciation on an older investment property?
Usually some. Capital works run at 2.5% a year for 40 years on residential construction started after 15 September 1987, so a 1995 building still has years left. Fittings that came with a property bought after 9 May 2017 are out, but new items you install count.
Is stamp duty on an investment property tax deductible?
Stamp duty on the transfer of the property is not deductible. It forms part of the cost base, which reduces any capital gain when you sell. Stamp duty on the mortgage is a borrowing expense, usually claimed over five years.
Do the 2027 negative gearing changes affect my 2025-26 tax return?
No. The changes are law but start on 1 July 2027. Even an established property bought after 12 May 2026 can be negatively geared against wages until 30 June 2027.
Before you lodge
Start with your loan statements, because interest is the biggest number and the one the ATO most often finds wrong. Sort every invoice into now, over time or never, and engage a tax agent before 31 October if you want one.
If your next purchase is still ahead, the 2027 rules make new build versus established a tax decision as well as a property one. You can get matched with a buyer's agent who covers your target area to judge both on the property's merits.
This is general information, not financial, legal or tax advice. Your deductions depend on your circumstances, so confirm them with a registered tax agent or the ATO.
Sources
- Australian Taxation Office, "Rental properties guide 2026" (NAT 1729-06.2026). Current at 1 June 2026.
- Australian Taxation Office, "Preparing your tax return". Accessed 6 October 2026.
- Australian Taxation Office, "Individuals and trusts" (registered agent lodgment program due dates). Accessed 6 October 2026.
- Australian Taxation Office, "What's new for individuals". Accessed 6 October 2026.
- Australian Taxation Office, "Tax reform: Boosting home ownership, reforming negative gearing and capital gains tax". Accessed 6 October 2026.
- Australian Government, Budget 2026-27, "Tax explainer: Negative Gearing and Capital Gains Tax Reform". May 2026.
- Holding Redlich, "Update on status of key tax measures announced in Budget 2026-27". 28 July 2026.
- Australian Taxation Office, "New guidance for rental property owners". 20 May 2026.
- Australian Taxation Office, PCG 2026/3, "Application of section 26-50 of the Income Tax Assessment Act 1997 to holiday homes that you also rent out". Accessed 6 October 2026.
- Australian Taxation Office, "From hacks to half-truths: ATO warns of tax time misinformation and reveals focus areas". 27 April 2026.
- Australian Taxation Office, "ATO warning to rental property owners: don't let your tax return be a 'fixer-upper'". 12 June 2024.
- Australian Taxation Office, "Tax rates: Australian residents". Accessed 6 October 2026.
