How to track rental property expenses for your ATO return
The ATO lets you deduct most costs of earning rental income, plus depreciation on the building and its fittings. What makes tax time quick is keeping every record for five years, sorting each cost into its ATO category, and splitting this year's deductions from the ones you claim over time.
From receipts to a tax-ready report
Keep every record for five years
Save receipts, invoices, bank and loan statements, and your property manager's annual summary. The ATO requires you to keep records of rental income and expenses for five years from the date you lodge, and for five years after you sell for capital gains tax.
Sort each expense into an ATO category
Group your costs the way the ATO does: loan interest, council and water rates, land tax, insurance, property-management fees, repairs and maintenance, advertising for tenants, body corporate fees, cleaning, gardening and pest control.
Separate what you claim now from what you claim over time
Most running costs are deductible in the year you pay them. Borrowing expenses, capital works (Division 43) and depreciating assets (Division 40) are claimed gradually over several years.
Know repairs versus improvements
A repair that restores something to its original condition is deductible now. An improvement or renovation is capital, claimed through depreciation or added to your cost base. Fixing defects that were there when you bought (initial repairs) is capital, not an immediate deduction.
Apportion where needed
If the property was only available to rent for part of the year, or is partly for private use, only claim the share that relates to earning rental income.
Produce a tax-ready summary
Pull it all into one categorised report you or your accountant can drop straight into your return, without a shoebox of receipts or a last-minute spreadsheet.
When can you claim each expense?
| Expense | When you claim it |
|---|---|
| Loan interest, council and water rates, land tax, insurance | The year you pay it |
| Property-management and letting fees | The year you pay it |
| Repairs and maintenance (restoring to original condition) | The year you pay it |
| Borrowing and loan set-up costs | Spread over 5 years, or the loan term if shorter. If they total $100 or less, claimed in full in the income year you incur them |
| Capital works: the building structure (Division 43) | 2.5% a year over 40 years if construction started on or after 16 September 1987; 4% over 25 years if it started between 18 July 1985 and 15 September 1987; nothing if it started before 18 July 1985 |
| Plant and equipment: oven, carpet, air conditioner (Division 40) | Depreciated over the asset's effective life |
In most cases you can't claim depreciation on previously used plant and equipment in a residential rental unless you bought it before 7:30pm AEST on 9 May 2017 and installed it before 1 July 2017. New or unused assets, and new builds, still qualify.
Questions landlords ask at tax time
Let BrickTrack do the sorting.
Import a year of transactions, file each one under its ATO category against the right property, and hand your accountant a report instead of a shoebox.
Your first property. No credit card required.