TOP TEN TAX TIPS FOR RENTAL PROPERTY INVESTORS 2024/25 from Mr Taxman, Dr Adrian Raftery

Over 2.27 million people claimed just more than $44.4 billion in rental deductions in their tax return last year.  With June 30 rapidly approaching, it is time to do some urgent tax planning.  Dr Adrian Raftery, principal of Mr Taxman and author of 101 Ways to Save Money on Your Tax - Legally! 2025-2026 edition (Wiley, May 2025, AU$32.95), gives some excellent tips for you to action and maximise your tax refund from your rental property this year.  

1. Initial repairs

A common mistake is to claim initial repairs or capital improvements as an immediate deduction.  Initial repairs to rectify damage, defects or deterioration that existed at the time of purchasing a property are generally considered capital in nature and not deductible, even if you carried them out to make the property suitable for renting.  Depreciation could be claimed on this expenditure as a capital works deduction over 40 years.

2. Prepay interest

If you are expecting that you will have a lower income next year (due to factors such as maternity leave, redundancy, a smaller or no bonus or perhaps cutbacks to overtime) then why not prepay interest for up to 12 months in advance before year end on your rental property and reduce your higher income this year. 

3. Depreciation schedule

If your investment property was built after 18 July 1985 then it is definitely worthwhile organising a depreciation schedule from a quantity surveyor.  You should be able to recoup their fee in your first tax return as deductions can be in the thousands each year.   But please note that since 1 July 2017 a limit has been placed on depreciation deductions on residential rental properties to only those investors who actually purchased the plant and equipment. Subsequent owners will be unable to claim depreciation deductions on the written down value of assets purchased by previous owners.

4. Travel to see your property

The old wives’ tale of claiming two trips per year is hogwash.  Since 1 July 2017, deductions for travel expenses related to inspecting, maintaining or collecting rent for a residential rental property are no longer available. Any absolute red flag with the taxman if you try to claim! Certain audit! 

5. Declare your AirBnB income but apportion expenses for private purposes

The tax rules are pretty clear. Any rental income that you receive — no matter how small — needs to be declared as assessable income in your return and you’ll need to pay tax on it. Trying to dodge the tax office by not declaring the income will end in tears. You may think that the income is so little that the ATO won’t bother, but the cash economy is huge and is definitely on the taxman’s hit list. If you advertise on the internet and guests are paying electronically then expect the ATO to find out about it. If you use part or all of your property for private purposes during the year (including holiday homes) then rental expenses will need to be apportioned. 

6. Negative gear upfront with a PAYG Withholding Variation

One of the major downsides to negative gearing is cash flow. My preference is that you wait until the end of the year to get your refund as it is a ‘forced form of saving’. But if high interest rates are causing stress and your cash flow is tight, you may want to complete a pay-as-you-go (PAYG) withholding variation application, which reduces the tax from each pay packet. The form is virtually a ‘mini-tax return’ which estimates your taxable income. You still need to lodge an annual tax return but don’t want to wait 12 months for the nice juicy refund.

7. Foreign investment properties

The ATO is also cracking down on taxpayers with properties overseas as they get more data each year from other tax jurisdictions.  Make sure that you disclose any income that you receive as you are taxed on worldwide income as an Australian tax resident.  These properties can be potentially “negatively geared” as you can claim deductions such as interest, repairs, rates and insurance on these properties. 

8. Keep your receipts

Each year the ATO makes contact with many thousands of taxpayers with rental properties.  With the ATO increasing their audit activity this year yet again it is important that you can explain and justify your claim.  The ATO motto is no receipt = no deduction so you could be costing yourself $$$ by not keeping those dockets!

9. Minimise capital gains tax (CGT)

If you are trying to sell your property and about crystallising a nice capital gain or two then consider exchanging contracts after 1 July to defer tax for another year.  And remember that if you hold your investment property for more than 12 months you reduce CGT by half. Please note that if you rent some rooms in your home from time to time it’s opening yourselves up to CGT down the track. 

10. Get a great accountant

Rental properties have been on the ATO’s watch list for a number of years now because the size of the tax deductions are significant and they are a haven for errors. Each year, the ATO contacts thousands of taxpayers with rental properties and asks them to explain and justify what they put in their tax return.  The last thing you need is a knock on the door from the taxman because you claimed too much especially with your rental property. A registered tax agent knows where the boundaries are in terms of what you can and more importantly can’t claim. And their fee is tax deductible too! Maximise your accountant’s knowledge by communicating with them often about your affairs.  Aside from pre-year end tax planning, contact them before any major transaction that you are about to undertake as a simple phone call may produce a simple strategy – such as setting up a company or having a property in the name of the lower earning spouse - which could save you hundreds of thousands over a lifetime.  It is far easier structuring a transaction before the event occurs than months after!

You now have got some great tax tips, it’s time to take action. Times are tough during this cost of living crisis so every dollar saved counts.

This information is of a general nature only and does not constitute professional advice. You must seek professional advice in relation to your particular circumstances before acting.

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These tips were provided by Mr Taxman, Adrian Raftery, author of 101 Ways to Save Money on Your Tax - Legally! 2025-2026 edition (Wiley, May 2025, AU$32.95). @mistertaxman www.mrtaxman.com.au

 101 Ways to Save Money on Your Tax – Legally! 2025-2026 edition

By Adrian Raftery

Published by Wiley May 2025

ISBN 9781284328635

AU$32.95

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For further information or to request an interview, please contact: Adrian Raftery on 1800 TAXMAN (1800 829 626) or 0418 210 599 adrian@mrtaxman.com.au