Rental properties sit on the ATO’s watch list every tax time, and 2026 is no different. The regulator keeps finding the same problems: interest claimed in full when part of the loan was private, repairs claimed that were really improvements, and deductions claimed for periods the property was not actually available to rent. Get it wrong one way and you invite an audit. Get it wrong the other way and you leave money with the ATO.
Here is a plain guide for Melbourne and Brisbane landlords on what you can claim, what you cannot, and the lines that trip people up.
What you can claim in the year you incur it
According to the ATO, these are deductible while the property is rented or genuinely available for rent:
- Loan interest, for the portion of the loan that relates to the rental property
- Council rates, water charges and land tax
- Property management and letting agent fees, and advertising for tenants
- Repairs and maintenance that restore the property to its original condition
- Building, landlord and contents insurance
- Body corporate or owners corporation fees
- Depreciation (covered below)
Depreciation: two types, often left on the table
Depreciation is the deduction landlords miss most, because it does not come out of your bank account. There are two parts:
- Plant and equipment (Division 40): assets like carpets, blinds, ovens and hot water systems, deducted over their effective life.
- Capital works (Division 43): the building structure itself, deductible at 2.5% a year for 40 years, for residential properties built after 15 September 1987.
A quantity surveyor’s depreciation schedule usually finds deductions that more than cover its cost. One rule to know: for second-hand residential properties bought after 9 May 2017, you generally cannot depreciate previously used plant and equipment. The Division 43 capital works deduction on the building still applies.
What you cannot claim, and the common traps
- Initial repairs. Fixing defects that already existed when you bought the property is a capital cost, not an immediate deduction.
- Improvements. Replacing something with something better, like a new kitchen or a whole new fence, is capital works claimed slowly at 2.5%, not a repair you can claim this year.
- Travel to inspect or maintain a residential rental. This has been denied since 1 July 2017, unless you are carrying on a business of letting property.
- Periods the property was not genuinely available for rent, including private use of a holiday home or holding it vacant without actively trying to rent it.
Repairs versus improvements: the line that trips people up
A repair restores the property to its original condition, such as fixing a leaking tap or mending part of a fence. An improvement makes the property better than it was, such as a renovated bathroom or replacing the whole fence with a superior one. Repairs are deductible now. Improvements are claimed gradually through capital works or depreciation. Mislabelling one as the other is a frequent reason returns get adjusted.
Apportion correctly
If the property was rented for only part of the year, used privately for part of the year, or is a room in your own home, you claim only the portion that relates to earning rent. Work it out on a time basis, a floor-area basis, or both. Claiming 100% when the use was mixed is a common error the ATO looks for.
Frequently asked questions
Can I claim interest while the property is vacant?
Only if it is genuinely available for rent and you are actively trying to find tenants, for example advertising at a market rent. Holding a property off the market or keeping it for private use does not qualify.
Do I really need a depreciation schedule?
It is not legally required, but a quantity surveyor’s schedule usually uncovers more in deductions than it costs, especially on newer buildings and recent renovations.
I did repairs right after buying. Are they deductible?
Repairs to fix damage or defects that existed at purchase are treated as initial repairs and are capital, so they are not immediately deductible. Repairs for wear and tear that happens while you are renting the property are deductible.
Want your rental claims done right?
Many of our clients are Melbourne and Brisbane property investors, including Chinese-Australian landlords with one or several properties. As registered tax agents, we make sure every deduction you are entitled to is claimed, and nothing that invites an ATO adjustment. If you would like a review before you lodge, book a short call.
Melbourne 03 9600 0803 | Brisbane 07 3188 8081 | info@wiselinkaccountants.com.au
