Top tax tips for property investors

As we near the end of the 2024-25 financial year, the Australian Taxation Office (ATO) has shared tips for property investors preparing their tax returns.

These guidelines are designed to help investors avoid common errors and make the most of their entitlements.

Understand what you can and can’t claim

Not all property expenses are immediately deductible, according to the ATO:

• Initial repairs (like fixing damage present when you bought the property) are not fully deductible upfront. Instead, you may be able to claim them over time as capital works deductions.
• Purchase costs such as conveyancing fees and stamp duty (except in the ACT) aren’t deductible, but can reduce your capital gains tax (CGT) when you sell.
• Loan interest is deductible only for the portion of the loan used for your rental property. Any money used for personal purposes – like school fees or holidays – must be excluded.

Capital improvements and borrowing costs

Structural upgrades and renovations are generally claimed over 40 years at 2.5% per year, according to the ATO.

If your borrowing costs (such as loan establishment or mortgage registration fees) exceed $100, you’ll need to spread those deductions over five years.

Other essentials to get right

• Body corporate fees: Only contributions to the administration fund are deductible in full. Special levies for capital works may be deductible over time.
• Apportionment: If your property is rented out only part of the year, you rent out only part of the property or rented to family at discounted rates, you need to adjust your claims accordingly.
• Record keeping: Keep records of income and expenses for the entire period you own the property and for five years after selling, to ensure you’re covered for CGT and audit purposes.
• Selling: Be aware of CGT rules and, if you're a foreign resident or selling to one, the capital gains withholding rules may apply.

The ATO has flagged these areas because they often trip up investors, and has warned: “Rental property income and deductions are a key focus area again this tax time.” It is a good idea to speak to your financial adviser or accountant if you have any questions.