Claiming tax deductions on an investment property involves offsetting expenses incurred while owning the property against your rental income, reducing your overall taxable income. It’s important to note that these deductions relate to the period the property is genuinely available for rent, not when it’s vacant.
As of December 2025, common deductions in Melbourne include property management fees (typically 1.5-2.5% of weekly rent), rates and taxes, insurance, repairs and maintenance – for example, fixing a leaking tap or replacing damaged fencing. Landscaping costs are generally deductible, but improvements like adding a deck are not immediately deductible but depreciated over time. Interest on the mortgage is also a significant deduction. Depreciation, calculated by a quantity surveyor, allows you to claim a portion of the building’s construction cost and assets within it (like ovens or air conditioners) each year. In 2026, many Melbourne investors are reviewing their depreciation schedules as building costs have increased, potentially leading to higher claims. When preparing to sell, remember that costs associated with the sale itself – such as agent commission (typically 1.5-2.5% in the Eastern Suburbs) and marketing expenses ($3,000-$8,000 for a full campaign) – are *not* deductible. Fletchers’ comprehensive marketing campaigns, utilising technology-driven client updates, are designed to maximise sale price, but the associated costs are capital gains tax considerations.
Understanding allowable deductions is crucial for optimising your investment returns, and it’s always recommended to consult with a qualified tax professional for personalised advice.