Top 5 Tax Deductions for Investors Who Own One Investment Property

Owning an investment property in Australia can be a powerful wealth-building strategy — and the good news is, the ATO allows you to claim a variety of deductions that can reduce your taxable income.

If you own just one investment property, here are the top 5 tax deductions you should know about:

1. Loan Interest

What it is: The interest charged on the loan used to purchase the investment property.

Why it matters: This is often the largest tax deduction available. If your loan is interest-only or has a high-interest component (for principle & interest loan, it’s approximately the first 10 years of the loan that the interest repayment exceeds the principle), this can significantly reduce your taxable income.

Important: You can only claim the interest, not the principal repayments. And the loan must be used solely for investment purposes.

2. Property Management Fees

What it is: Fees paid to a real estate agent or property manager to handle the leasing and management of your property.

Why it matters: These fees are 100% tax deductible and include services such as:

• Collecting rent

• Handling maintenance requests

• Conducting inspections

• Managing tenant communications

3. Depreciation (Capital Works & Assets)

What it is: A non-cash deduction that recognises the gradual wear and tear of your building and its fixtures over time.

There are two types:

Capital works deduction (Division 43): For the building structure (e.g. bricks, roof, walls).

Plant and equipment depreciation (Division 40): For fixtures like carpets, appliances, air conditioners.

Pro tip: A quantity surveyor can prepare a depreciation schedule that ensures you maximise this deduction.

4. Repairs and Maintenance

What it is: Costs related to fixing something that was damaged due to wear and tear during the tenancy (e.g. leaking taps, broken fences, repainting due to tenant damage).

Why it matters: These costs are immediately deductible in the year they are incurred.

Caution: If you’re improving the property (not just repairing), it may be considered a capital expense and depreciated over time instead of claimed immediately.

5. Council Rates, Water, and Insurance

What it is: Ongoing property expenses such as:

• Council rates

• Water charges (if you pay them)

• Landlord insurance (covering things like loss of rent, tenant damage, or legal liability)

Why it matters: These are often overlooked but can add up to thousands each year — and they’re all deductible.

Important: Keep Good Records

The ATO loves paperwork — and having clear records is key if you ever get audited. Keep copies of:

• Loan statements

• Invoices

• Receipts

• Property management reports

• Depreciation schedules

• Use cloud accounting tools or even a spreadsheet to keep everything organised.

Even if you only own one investment property, the tax benefits can be significant if you know what to claim.

The key is to stay informed, keep good records, and get the right advice — especially when it comes to depreciation and repairs vs. improvements.

If you’re not sure you’re claiming everything you’re entitled to, a quick chat with a qualified tax accountant could put thousands back in your pocket at tax time.

Note: This article is for information purposes only and should not be considered as tax advice.