Owning an investment property in NSW can be one of your most rewarding wealth-building moves—but when tax time comes around, many landlords miss out on thousands in deductions or risk ATO penalties due to poor record-keeping and outdated practices.
This comprehensive guide breaks down what you can claim, what’s changed for the 2024/25 financial year, and how to optimise your property’s cash flow while staying compliant.
Why Tax Planning Matters for Landlords
In 2024, Australian landlords received over $51 billion in rental income. However, many still lose money due to avoidable mistakes like unclaimed depreciation, mixing capital improvements with repairs, or incorrect expense categorisation.
A strategic tax approach will:
✅ Improve your cash flow
✅ Increase your net return
✅ Minimise ATO audit risks
What Can You Claim in 2025?
Here are key updated deductions landlords in NSW should know:
Interest on Your Loan
Interest on your investment property loan remains fully deductible if the loan is used for income-producing purposes.
Repairs vs. Capital Improvements
– Repairs: Immediately deductible (e.g., fixing a leaky tap).
– Improvements: Must be depreciated (e.g., renovating a bathroom).
Depreciation & Capital Works
– Updated ATO guidelines for 2025 confirm:
– Capital works (Division 43): 2.5% per year over 40 years.
– Plant & equipment (Division 40): Only claimable on new assets purchased and installed after May 2017 reforms.
Using a quantity surveyor for a depreciation schedule can yield $5,000–$10,000 in additional deductions annually.
Property Management & Agent Fees
Fully deductible, including leasing fees, advertising, and management commissions.
Council Rates, Water Rates, and Land Tax
All deductible in the year incurred if the property is rented or available for rent.
Insurance
Landlord insurance, building insurance, and public liability premiums are deductible.
Travel Deductions
Post-2017, travel expenses to inspect properties are not deductible. Only professional property managers can claim travel-related deductions on your behalf for management purposes.
Utilities Paid by Landlord
If included in the rental agreement, utilities paid by the landlord are deductible.
Legal Expenses
Legal fees related to evicting tenants or recovering rent are deductible. Costs related to property purchase or sale are not.
📈 Common Mistakes Landlords Make
🚫 Not differentiating repairs from capital improvements
🚫 Failing to use a depreciation schedule
🚫 Missing partial year deductions if property becomes available mid-year
🚫 Using incorrect apportionment for shared properties
🚫 Inadequate records leading to disallowed claims during audits
Should You Use a Property Accountant?
– ATO audit activity has increased, with a 20% rise in property-related audits in 2024 focusing on:
– Overclaimed interest deductions
– Incorrectly classified expenses
– Omitted rental income
Using a qualified property accountant helps:
✅ Maximise legitimate claims
✅ Reduce audit risk
✅ Ensure GST, PAYG, and other obligations are handled correctly
Case Study: How Depreciation Adds Up
– Tom, a landlord in Parramatta, purchased a 3-bedroom apartment in 2022. Using a quantity surveyor, he secured:
– $7,800 in depreciation deductions in FY24/25
– Reduced taxable income, saving ~$2,900 in tax
Without this, Tom would have missed out on 8% of his annual rental income in potential tax savings.
Checklist for EOFY Preparation
✅ Gather loan interest statements
✅ Collect receipts for all property expenses
✅ Request or update your depreciation schedule
✅ Review rental income records
✅ Book a session with your property accountant before submission
Conclusion: Tax Strategy is Wealth Strategy
Smart landlords don’t just pay tax; they plan it.
If you want to maximise your returns, protect your investment, and stay compliant, now is the time to organise your tax strategy.
