TaxCheckNow Research Team · TaxCheckNow
TaxCheckNow publishes what the ATO states, with the figure and the source attached. This page answers one question about Rental Property Deduction Audit, and every number on it is traceable to the source linked at the end.
The answer
The expense is a day-to-day running cost (such as repairs, rates, insurance, or interest) incurred during a period the property was rented or genuinely available for rent, and the expense is not capital or private in nature. The expense may qualify as an immediate deduction in the income year it is incurred, subject to any required apportionment for partial availability.
Where the circumstances differ, so does the outcome — the cases below set out each one.
The governing reference is Income Tax Assessment Act 1997.
The numbers
The ATO sets the following. Purchase price of rental property (Example 6): 170000 AUD. Surveyor's fees (Example 6): 350 AUD. Stamp duty on transfer (Example 6): 750 AUD. Total incidental costs included in cost base (Example 6): 1100 AUD.
Worked example
Withholding rate where contractor does not provide ABN. A landlord pays a plumber for emergency repairs to a rental property that was tenanted throughout the year. The plumber does not provide an ABN.
Because the contractor did not provide an ABN, the landlord is generally required to withhold 47 % of the payment and remit it to the ATO. Failing to do so may result in losing the deduction for that expense entirely.
Stamp duty on transfer (Example 6). A property investor pays stamp duty on the transfer of a rental property at purchase and wants to claim it as a rental expense deduction.
Stamp duty on transfer is generally not deductible as a rental expense. However, an amount of 750 AUD may be includable in the cost base and reduced cost base of the property for CGT purposes, potentially reducing any future capital gain.
How this plays out
The same rule produces different outcomes depending on which conditions are met. Each case below pairs the condition with the result the ATO publishes for it:
Case 1.
- Applies when: The expense is a day-to-day running cost (such as repairs, rates, insurance, or interest) incurred during a period the property was rented or genuinely available for rent, and the expense is not capital or private in nature.
- Outcome: The expense may qualify as an immediate deduction in the income year it is incurred, subject to any required apportionment for partial availability.
Case 2.
- Applies when: The cost relates to a depreciating asset (such as appliances or carpets) or to constructing or improving a building or structural element of the rental property.
- Outcome: The cost is generally not immediately deductible in full; it may need to be claimed over several years either as decline in value of a depreciating asset or as a capital works deduction. Capital costs that are not deductible at all may instead be includable in the CGT cost base.
Case 3.
- Applies when: The expense relates to a period the property was not genuinely available for rent, to private use of a holiday home, to holding a non-income-producing property used as collateral, to vacant land, to second-hand depreciating assets, or to acquisition and disposal costs.
- Outcome: The expense is generally not deductible as a rental expense. Depending on the type of cost, an alternative treatment such as CGT cost base inclusion may apply.
Case 4.
- Applies when: A contractor performing services on the rental property does not provide an ABN at the time of payment.
- Outcome: There is an indicated obligation to withhold a set percentage of the payment at 47 % and remit it to the ATO. Failure to withhold may result in losing the deduction for that expense entirely.
The source
Yusef and Marie bought a rental property as joint tenants for $170,000 in July 2024.
- Rental expenses | Australian Taxation Office
- Rental properties guide 2025 | Australian Taxation Office
- ATO — Rental properties
- ATO — Work out your capital works deductions
Figures verified against Rental expenses on 29 May 2025.
Check your own position
Open the Rental Property Deduction Audit calculator to see which outcome applies to your circumstances.
TaxCheckNow is a publisher, not an adviser. This page states what the ATO publishes; it is not advice about your situation.
Check your own position