Rental Deductions · Calculator

Rental Property Deduction Wizard

Classify rental income and expenses using the ATO categories, then estimate your share of the net rental position and the resulting change in resident income tax. The wizard flags initial repairs, restricted travel and second-hand residential assets without guessing depreciation schedule amounts.

Div 43 vs Div 40Initial-repairs trap2017 travel ban

01 —INPUTS

Property & income

Property type

Gross annual rent (AUD)

Your other taxable income

Used to compute your marginal tax rate and the tax saving from deductions.

Income-producing use (%)

Default expense apportionment only. Gross rent is never reduced by this percentage.

Your legal ownership share (%)

Income and deductions are reported according to legal ownership.

Include 2% Medicare levy in tax saving

Your expenses

Category	Traps	Year 1 deduction
Council rates, water, insurance, advertising, property management, genuine repairs once tenanted, pest control, cleaning, gardening, land tax, body corporate admin fund, interest on loan used to buy the property. This expense relates to rental use (%)	Initial repairTravel2nd-hand Div 40	$22,000
Council rates, water, insurance, advertising, property management, genuine repairs once tenanted, pest control, cleaning, gardening, land tax, body corporate admin fund, interest on loan used to buy the property. This expense relates to rental use (%)	Initial repairTravel2nd-hand Div 40	$2,200
Council rates, water, insurance, advertising, property management, genuine repairs once tenanted, pest control, cleaning, gardening, land tax, body corporate admin fund, interest on loan used to buy the property. This expense relates to rental use (%)	Initial repairTravel2nd-hand Div 40	$900
Council rates, water, insurance, advertising, property management, genuine repairs once tenanted, pest control, cleaning, gardening, land tax, body corporate admin fund, interest on loan used to buy the property. This expense relates to rental use (%)	Initial repairTravel2nd-hand Div 40	$1,200
Council rates, water, insurance, advertising, property management, genuine repairs once tenanted, pest control, cleaning, gardening, land tax, body corporate admin fund, interest on loan used to buy the property. This expense relates to rental use (%)	Initial repairTravel2nd-hand Div 40	$2,100
Council rates, water, insurance, advertising, property management, genuine repairs once tenanted, pest control, cleaning, gardening, land tax, body corporate admin fund, interest on loan used to buy the property. This expense relates to rental use (%)	Initial repairTravel2nd-hand Div 40	$3,000
Council rates, water, insurance, advertising, property management, genuine repairs once tenanted, pest control, cleaning, gardening, land tax, body corporate admin fund, interest on loan used to buy the property. This expense relates to rental use (%)	Initial repairTravel2nd-hand Div 40	$1,500

02 —RESULTS

Year 1 summary

Immediate (s 8-1)$32,900

Capital works — Div 43$0

Plant & equipment — Div 40$0

Borrowing costs — s 25-25$0

Total deductible this year$32,900

Your share of gross rental income$30,000

Rental loss$2,900

Estimated tax reduction (effective 32.0%)$10,528

Calculated from the change in resident income tax and Medicare levy between taxable income before and after these deductions, including gross rent.

Next steps: Project 10 years of negative gearing · Build a full depreciation schedule · Run the investment property hub.

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The three traps that cost landlords most

1. Initial repairs (TR 97/23)

Work that remedies defects already present when you acquired the property is capital, not an immediate repair deduction. Depending on the work, it may be treated as capital works, as part of a depreciating asset, or as CGT cost-base expenditure. The wizard flags the line for classification instead of automatically adding it to the property cost base.

2. Travel to residential rental (s 26-30, from 1 July 2017)

For an individual holding residential property as an investment, travel to inspect, maintain or collect rent is generally not deductible. Rental-property businesses and excluded entities can fall within exceptions, while non-residential property remains subject to ordinary deduction rules. This individual-investor wizard disallows flagged residential travel.

3. Second-hand Div 40 (Housing Tax Integrity Act 2017)

Where the post-9 May 2017 residential restriction applies, you generally cannot deduct decline in value for existing second-hand assets. Do not add those asset costs directly to the property's CGT cost base: separate balancing-adjustment and CGT rules can apply to the asset. New assets you buy and install can still qualify.

Repairs vs improvements — the entireties test

The line between an immediately-deductible repair and a Div 43 capital improvement is the "entireties" test: if you replace the whole of a separate identifiable thing (whole roof, whole kitchen, whole fence) it's capital. If you patch or partially replace the same item, it's a repair. Painting is usually a repair; retiling an entire bathroom is usually an improvement; replacing a broken tap is a repair; replacing the entire plumbing system is an improvement.

FAQ

What is an initial repair and why isn't it deductible?

An initial repair remedies a defect that existed when you acquired the property. Under TR 97/23 it is capital expenditure rather than an immediate repair deduction. Its later treatment depends on what the work relates to: it may be capital works, part of a depreciating asset, or CGT cost-base expenditure, so the wizard flags it for review rather than automatically assigning the whole amount to the property cost base.

When can I deduct travel to my rental?

Individuals generally cannot deduct travel relating to a residential rental property under section 26-31. Exceptions can apply where the property is used in a rental-property business or the owner is an excluded entity. Travel relating to non-residential premises remains subject to the ordinary deduction rules.

What changed about depreciation in 2017?

The Housing Tax Integrity Act 2017 (Div 40-27 ITAA 1997) stopped subsequent owners from claiming Div 40 depreciation on previously-used plant & equipment in residential property. If you bought a previously-occupied dwelling after 9 May 2017, second-hand items (existing dishwasher, oven, carpet etc.) are non-deductible — only Div 43 capital works and brand-new items you install are claimable.

How are borrowing costs deducted?

Under section 25-25, total deductible borrowing expenses of $100 or less are deductible in the year incurred. If they exceed $100, the deduction is spread by days over the shorter of five years or the loan term, starting when the loan begins. Mixed-purpose borrowing must also be apportioned to the income-producing loan use.

Is replacing a whole roof a repair or a capital improvement?

The 'entirety' test: replacing the whole of a separate identifiable thing is usually capital (Div 43 capital works). Patching part of the roof is a repair (immediately deductible). The key word is 'entireties' — if you replace the whole kitchen, it's capital. If you swap a broken tap, it's a repair.

What's the difference between Div 43 and Div 40?

Division 43 covers eligible construction expenditure on capital works; the applicable 2.5% or 4% rate depends on construction commencement, use and the type of works. Division 40 covers eligible depreciating assets and uses the asset's effective life. This wizard asks for the current-year amount from your schedule instead of guessing it from the purchase cost.

Do I have to apportion expenses if I use the property privately?

Yes. If you stay in the property yourself, use it rent-free for family, or only genuinely offer it for rent part of the year, deductions must be apportioned. The general test (TR 97/23) is the income-producing fraction of total days. Keep a diary for holiday-home scenarios.

Tax Accuracy & Sources

Reviewed: March 2026 · Tax year: 2026-27

Rental property deduction categoriser for individual resident owners. Reports gross rent and expenses by legal ownership, applies expense-specific private-use apportionment, calculates s 25-25 borrowing expenses by days, accepts current-year Div 40/43 schedule amounts, and estimates the actual resident income-tax and Medicare liability change. Flags rather than guesses the final treatment of initial repairs and restricted second-hand assets.