In short
- Costs you pay to earn the rent can usually be claimed. Private costs cannot be claimed, and the costs of buying the property cannot be claimed straight away.
- Some costs come off in the year you pay them. Others, like loan set-up costs and the building itself, are spread over years.
- Costs you cannot claim along the way, such as stamp duty, are usually added to what the property cost you, which lowers the taxable gain when you sell.
- Under the law today, on a home bought after 7.30 pm on 12 May 2026, a loss from the 2027-28 income year can’t be taken off your other income, such as wages. A Bill not yet law would exempt a newly built home.
The pile of receipts
You have settled, the tenant has moved in, and the receipts are piling up. Some will come back to you at tax time. Some will not, or not yet. Knowing which is which helps you plan your cash flow, and helps your accountant help you.
The one test behind every claim
Every claim starts with one question: was the cost paid to earn the rent? The tax law lets you take a cost off your income to the extent it is paid to earn that income.
Three kinds of cost fail the test. A private cost fails it. So does a cost of a capital kind, such as the price of the property itself. So does a cost the law blocks by a rule of its own.
Three buckets for your costs
The table sorts your costs by when they count.
| When it counts | What it covers | How it works |
|---|---|---|
| This year | Costs of earning rent | Off this year’s income |
| Over the years | Loan costs; the building | Spread over 5 or 40 years |
| When you sell | Stamp duty, buying costs | Added to its cost |
Costs of earning the rent come off this year’s income. Loan set-up costs are spread over five years (or the loan term, if shorter), and the building over 40 years. Stamp duty and the other costs of buying are added to what the property cost you, and count when you sell.
Bucket one: this year
Running costs paid to earn the rent are usually claimed in the year you pay them.
Interest is the big one for most investors. What decides it is how the borrowed money is used, not what the loan is secured on. Money borrowed against a rental and used privately gives no deduction. Money borrowed against your home and used to buy or build a rental can.
So if part of a loan is used for private spending, only the share used to earn the rent counts.
Bucket two: over the years
Some costs are spread out. Loan set-up costs, such as loan application fees, are spread over five years, or over the loan term if that is shorter. If your total for the year is $100 or less, you claim it all that year. If you repay the loan early, the rest comes off in that year.
The building is spread out too. For a home whose construction commenced on or after 16 September 1987, the building is written off at 2.5 per cent a year, over 40 years. The claim starts only once construction is finished, and counts the days the home is rented or ready to rent. Nothing is claimed while it is being built.
Fittings are different. For a rental bought after 7.30 pm on 9 May 2017, in most cases you cannot claim the decline in value of second-hand fittings that came with an established home. Fittings in a new home, never lived in, are not caught by that rule.
Bucket three: when you sell
Costs you could not claim along the way often still count. Stamp duty, the costs of transfer, search fees, and the fees of a valuer, surveyor or broker when you bought are added to the property’s cost. A higher cost means a smaller taxable gain when you sell.
There is a catch in the other direction. If you bought after 7.30 pm on 13 May 1997, the building write-off you claimed, or could have claimed, comes off the property’s cost. And a cost you have claimed, or can claim, is not added to the property’s cost.
The loss limit on homes bought after 12 May 2026
Under the law today, from the 2027-28 income year a loss on a home bought after 7.30 pm on 12 May 2026 can’t be taken off your other income; it carries forward against later rent or gains on homes. The Tax Reform No. 3 Bill 2026, passed by the House of Representatives on 29 October 2026 and not yet law, would exempt a newly built home.
The costs are still claimed against the rent. What changes is where a loss can go.
My view
My own view is that a property should stand up on its cash flow first, and the claims are a bonus, not the reason to buy. That’s my opinion. You may weigh it differently, and that’s fine.
One easy next step
If you would like the building steps in order, from the first purchase to the first tax return, the free lessons by email walk through each one in plain words. All you need is your first name and email.
Education only, not personal or financial advice.