Rental Property Deduction Wizard

Landlord deductions are where investors lose the most money to mistakes — claiming an initial repair when it's capital, forgetting the 2017 travel restriction, or trying to depreciate a second-hand dishwasher. This wizard walks each expense into the right ATO bucket and flags the traps as you go. Everything stays in your browser.

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 (%)

100% if genuinely available for rent all year. Lower if holiday home / mixed private use (TR 97/23).

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.	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.	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.	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.	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.	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.	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.	Initial repairTravel2nd-hand Div 40	$1,500

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

Gross rental (apportioned)$30,000

Rental loss$2,900

Tax saving @ 32.0%$10,528

Landlord traps detected

Immediate deductions over $10,000 in one year can draw ATO attention. Ensure you have invoices and a contemporaneous record.

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

The three traps that cost landlords the most

1. Initial repairs (TR 97/23)

The pre-existing leaky tap, the peeling paint you painted over before the first tenant, the fence you fixed in settlement week — these are capital, not repairs, because they remedy defects that existed at purchase. They add to your CGT cost base, reducing tax on eventual sale, but you cannot claim them against this year's rent.

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

Airfares, car expenses, accommodation — all non-deductible for residential property regardless of purpose. The restriction does not apply to commercial property, or where letting is carried on as a business (institutional investors, not mum-and-dad landlords). If you tick the travel box on a residential line, the wizard zeroes it automatically.

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

Bought a previously-occupied dwelling? The existing dishwasher, oven, carpet and air-conditioner that came with it are not depreciable. Only Div 43 capital works and brand-new items you install after purchase qualify for Div 40. Substantially renovated or brand-new properties sidestep this restriction.

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.

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

An initial repair fixes a defect that existed when you bought the property — peeling paint, broken fence, leaky shower you inherited. Under TR 97/23, the ATO treats these as capital expenditure, not ordinary repairs. They're not immediately deductible; they add to your CGT cost base instead. Genuine repairs once the property has been earning rent are deductible.

When can I deduct travel to my rental?

For residential rental property, travel expenses have NOT been deductible since 1 July 2017 (s 26-30 ITAA 1997). This includes airfares, car expenses, accommodation — even to inspect the property. The restriction does not apply to commercial property, or to a property held by a landlord entity in the business of letting rental properties.

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 s 25-25 ITAA 1997, borrowing costs (loan establishment, valuation for the lender, mortgage stamp duty, LMI) are spread over the shorter of 5 years or the loan term. Exception: if total borrowing costs are under $100, you can deduct them in full in year one.

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?

Div 43 covers the building structure and fixed items (walls, roof, concrete driveway, fitted kitchen cabinetry) — deducted at 2.5%/year over 40 years for residential, 4% for short-life industrial. Div 40 covers plant & equipment that are separate to the building (dishwasher, oven, carpet, blinds, air conditioner) — deducted over each item's effective life per TR 2022/1.

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.

Sources

ATO — Residential rental properties guide (NAT 1729)
TR 97/23 — Deductions for repairs
TR 2022/1 — Effective life of depreciating assets
Treasury Laws Amendment (Housing Tax Integrity) Act 2017
ITAA 1997 ss 8-1, 25-25, 26-30, Division 40, Division 43

Tax Accuracy & Sources

Reviewed: March 2026 · Tax year: 2025-26

This calculator is an estimate tool and may not cover all personal circumstances. For state-based taxes, confirm details with your state or territory revenue office.

ATO: Tax rates and codes