How to track rental property expenses for your ATO return
Tracking your rental property expenses well is what turns a stressful tax return into a quick one. The ATO lets you deduct most costs of earning rental income — from loan interest and council rates to repairs, insurance and property-manager fees — plus depreciation on the building and its fittings. The key is to keep every record for five years, sort each expense into the right ATO category, and separate the costs you claim this year from the ones you claim gradually over time. Here's how to do it.
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 five years after you sell, for capital gains.
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 — no shoebox of receipts, no 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 / loan set-up costs | Spread over 5 years, or the loan term if shorter |
| Capital works — the building structure (Division 43) | 2.5% a year over 40 years |
| Plant & equipment — oven, carpet, air conditioner (Division 40) | Depreciated over the asset's effective life |
Depreciation on previously-used plant & equipment in a second-hand residential property is generally limited under the 2017 rules — new or unused assets, and new builds, still qualify.
Common questions
- How long do I need to keep rental property records?
- Five years. The ATO requires you to keep records of your rental income and expenses for five years from the date you lodge your return, and five years after you sell the property for capital gains purposes.
- Can I claim depreciation on a second-hand rental property?
- For the building itself (capital works, Division 43) — yes, if it was built after 15 September 1987. For plant and equipment (Division 40) such as ovens and carpet, deductions on previously-used items in a second-hand residential property are generally limited under the 2017 rules; new or unused assets, and new builds, still qualify.
- What rental expenses are tax deductible?
- Most costs of earning rental income: loan interest, council and water rates, land tax, insurance, property-management fees, repairs and maintenance, advertising for tenants, body corporate fees, and depreciation. Costs of a capital or private nature aren't immediately deductible.
Let BrickTrack do the sorting
Upload your transactions and BrickTrack organises them into ATO categories, ready as a report for your accountant. Start free with one property — no credit card required.
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