Rent you receive, or that you are entitled to receive, from an Australian rental property is generally assessable income. Against that income you may be able to claim deductions for expenses you incur in earning it, such as interest, agent fees, council rates, insurance, repairs, and, where the rules allow, depreciation and capital works. If the deductions are larger than the rent, the loss can reduce other income under the current negative-gearing rules, subject to the changes legislated from 1 July 2027 for many established dwellings.

The Australian Taxation Office (ATO) expects you to include all the rent, to apportion expenses for private use or for periods the property was not genuinely held to produce income, and to keep records. Over-claiming repairs, travel, or second-hand depreciating assets is a recurring compliance theme in ATO rental guidance.

This explainer sits with how negative gearing works, the negative gearing calculator, interest expenses and debt recycling, land tax and the CGT guides.

This is general information only. It is not personal tax advice, and it is not a rental schedule.

What income do you declare?

Declare the rent for the period you were entitled to it, including:

  • rent paid by a tenant, a boarder or a holiday guest
  • amounts an agent collected on your behalf, even if some of the money was later used to pay expenses
  • letting and booking fees that form part of the rent, where they are your income
  • insurance payouts that replace lost rent, in many cases
  • a tenant's payment for damage, to the extent it is income rather than a mere reimbursement you then spend on a repair, depending on the facts

If you only own a share of the property, you generally declare your share of the rent, and you claim your share of the deductions, in line with your legal interest, unless a genuine, documented agreement says otherwise. The ATO's interest-expense examples for joint owners, discussed in the debt recycling guide, show how legal title and a written agreement can affect that split.

A holiday home is only treated as a rental if it is used, or genuinely held for use, mainly to produce rental income. Occasional letting, with long periods of private use or of the property not being available on commercial terms, can limit both the deductions and the interest claim.

What expenses can you usually claim?

Common deductible expenses, where they are incurred in earning the rent and you have records, include:

  • interest on money borrowed to buy the rental property, or to repair or improve it, as explained on the ATO interest-expenses page
  • agent's fees and advertising for tenants
  • council rates, water charges you cannot recover, and land tax on the investment land
  • insurance for the building and for landlord risks
  • repairs and maintenance that fix wear and tear or damage, as distinct from improvements
  • body corporate or owners-corporation fees, other than special levies that are for capital works, which may be treated differently
  • capital works deductions for eligible construction costs, and decline in value of eligible depreciating assets
  • the cost of a quantity surveyor's report, in the year you pay it

You cannot claim:

  • the purchase price of the land, or stamp duty on the purchase, as an immediate deduction. Those amounts usually sit in the CGT cost base, except to the extent a specific capital works or depreciating-asset rule applies
  • repayments of loan principal
  • expenses for periods of private use, or for a property not held to produce assessable income
  • travel expenses to inspect, maintain or collect rent for a residential rental property, in most cases. The ATO says you generally cannot deduct car costs, flights, taxis, accommodation or meals for that travel, unless you are carrying on a business of letting rental properties or you are an excluded entity. Owning one or several rental properties is usually treated as an investment, not a business

Repairs restore something to its former condition. Improvements, extensions and initial repairs to defects that existed when you bought the property are often capital, and may only be claimable over time as capital works or as depreciating assets, or may sit in the cost base until you sell. Keep invoices that describe the work, not only a total paid to a tradesperson.

How a rental loss is taxed

If allowable deductions exceed rental income, the loss is a negatively geared loss under the current law and can usually be offset against other income, such as salary, in the same year. That is the mechanism described in how negative gearing works. From 1 July 2027, losses on many established residential properties will be quarantined for new purchases, with different treatment for some new builds and for properties already owned. Use the negative gearing calculator and the 2027 changes guide if that date is relevant to a purchase you are considering.

A paper loss that includes depreciation and capital works is not the same as a cash shortfall. Those deductions do not leave your bank account in the year you claim them, and capital works claims generally reduce the CGT cost base when you sell.

When you sell

A rental property is generally subject to CGT when you sell it, with the main residence exemption usually unavailable if it was never your home, or reduced if it was your home for only part of the time. See the main residence CGT exemption and the CGT calculator.

Capital works deductions already claimed usually reduce the cost base. Depreciating assets may have a separate balancing adjustment. Selling costs, and the original purchase costs that were not deducted, generally form part of the CGT calculation.

Vacant residential land tax and foreign purchaser surcharges are state taxes. A surcharge paid at purchase may form part of the cost base, depending on the facts. VRLT and land tax incurred while the property produced rent are usually considered with your other holding costs for that year.

Records the ATO expects

Keep, for each property and each year:

  • loan statements and an interest summary, with any private redraws identified
  • agent statements, rent ledgers and bond records
  • council, water, insurance and land-tax assessments
  • invoices and contracts for repairs, improvements and capital works
  • depreciation and capital works schedules, including any quantity surveyor report
  • records of days the property was rented, available for rent, or used privately
  • sale and purchase contracts, and any capital works notice you received or provided

The ATO can ask for these years after you lodge. If an agent or a bookkeeper prepares the rental schedule, you are still responsible for what goes in your return.

Frequently asked questions

Do I declare rent my agent has not yet paid to me?

You generally declare rent you are entitled to in the year, even if the agent pays you later, subject to the usual derivation rules. Use the annual agent statement and adjust for amounts that belong to another year.

Can I claim furniture I bought for a newly purchased established property?

New items you buy can often be depreciated, or immediately deducted if they cost $300 or less and are not part of a more expensive set. Second-hand plant that came with a residential rental acquired at or after 7:30pm AEST on 9 May 2017 is often not deductible for an individual investor. See depreciation and capital works.

Is a short-term holiday let taxed the same way as a long-term lease?

The rent is still income. Deductions still have to match periods of genuine income-producing use, and GST, council planning and state tenancy rules can also differ. A holiday home with substantial private use is a particular risk area in ATO guidance.

General information warning

This article is general information only. It is not personal financial product advice or tax advice, and it is not a recommendation to buy, hold or negatively gear a rental property. It does not take into account your objectives, financial situation or needs. Deduction rules, the 2027 negative-gearing changes and CGT all depend on your facts. Consider speaking with a registered tax agent, and confirm the current ATO pages, before you lodge or sign a contract.

Sources

Last reviewed: November 2026.