Begin the New Year right: Tax deductions every rental provider should know

4 mins reading

With 2025 already underway, it’s an opportune time for property investors to ensure they are maximising their financial return, setting the stage for a prosperous year ahead. One of the most effective ways to maximise your investment returns is by taking full advantage of the tax deductions available for rental properties. These deductions not only reduce taxable income but also boost cash flow, creating opportunities for portfolio growth and further investments.

We’ve outlined here some of the most valuable deductions that every rental provider should be aware of as they plan for the year ahead.

Key tax deductions
  1. Interest repayments
    Rental providers can claim interest charged on their rental property’s loan, as well as associated fees. However, repayments on the principal amount or any portion of the loan used for private purposes must be excluded.

  2. Insurance
    Protecting your investment with landlord or building and contents insurance is essential. The premiums for these policies are tax deductible, including pre-paid premiums claimed in the same financial year.

  3. Repairs and maintenance
    Repairs (fixing existing damage) and maintenance (preventing future damage) are deductible, but it’s important to distinguish these from capital improvements. For example, varnishing a deck is deductible as maintenance, but retiling a bathroom is considered a capital improvement and must be depreciated over time.

  4. Travel expenses
    While changes in legislation restrict travel deductions to certain entities, corporate investors or trusts may still be eligible. Check with your accountant to determine your eligibility.

  5. Body corporate fees
    If your property is part of a strata, the associated body corporate fees are deductible. However, maintenance or cleaning costs included in these fees cannot be claimed separately.

  6. Property management fees
    The associated fees, including costs for inspections, leasing, and tenant communication, are fully deductible.

  7. Utilities and council rates
    Any utilities you pay, such as electricity or internet, as well as council rates, are 100 per cent deductible while your property is rented or available for rent.

  8. Pest control and gardening
    Expenses for pest control, lawn mowing, and gardening services included in lease agreements can be claimed as deductions.

  9. Land tax
    Annual land tax on investment properties is fully deductible, subject to thresholds and exemptions that vary by state or territory.

  10. Water rates
    Tax deductions apply to water expenses directly incurred by the rental provider, such as annual service charges or sewer fees, even if the renters cover water usage.

  11. Refinancing costs
    Administrative fees incurred when refinancing your investment property’s mortgage, including loan establishment fees, early discharge fees, or break costs, can be claimed as deductions.

  12. Legal fees
    Legal expenses related to rental activities, such as resolving renter disputes or pursuing damages, are deductible. Legal costs tied to property acquisition (e.g., stamp duty) are not immediately deductible but form part of the property’s cost base.

  13. Tax depreciation schedules
    Engaging a specialist to prepare a tax depreciation schedule ensures that all available depreciation deductions are accurately calculated. BMT Tax Depreciation highlights that their schedules typically uncover thousands in deductions, with an average first-year claim of more than $11,000. For more information about tax deprecation, please read our article here.

For rental providers, optimising tax deductions is about more than just saving money—it’s about creating a sustainable foundation for long-term financial success. By working with your financial advisor and property manager, and staying informed about available deductions, you can position your portfolio for growth and success in the year ahead. For missed opportunities in previous years, a thorough review with a tax professional may uncover significant savings.

In compiling this article, Kay & Burton relied upon information supplied by several external sources. This article has been provided for general information only and has not been tailored to your personal circumstance. Although high standards have been used in the preparation of the information, analysis, views, and projections presented in this article, Kay & Burton does not owe a duty of care to any person in respect of the contents of this article and does not accept any responsibility or liability whatsoever for any loss or damage resulting from any use of, reliance on or reference to the contents of this article.