Investing in property is a powerful wealth-building strategy, but it’s not just about location, tenants, and capital growth — it’s also about tax.
Understanding how taxation affects your investment can make a significant difference to your cash flow, long-term returns, and compliance with the ATO (Australian Taxation Office). Whether you’re a first-time investor or a seasoned landlord, staying tax-smart is essential.
Here’s what every Australian property investor needs to know.
1. Rental Income Is Taxable
All income received from renting out a property must be declared in your tax return. This includes:
- Regular rent payments
- Reimbursements for bills (e.g. water, electricity)
- Insurance payouts (e.g. loss of rent cover)
- Platform income (e.g. Airbnb, Stayz bookings)
Pro Tip: Keep detailed, organised records. The ATO uses data-matching with banks and platforms like Airbnb to ensure full transparency.
2. Rental Property Deductions: What Can You Claim?
The upside of rental income being taxable? You can claim deductions on many of the costs involved in owning and managing your property. These include:
- Interest on your investment loan
- Council and water rates
- Property management fees
- Repairs and maintenance
- Building and fittings depreciation (via a depreciation schedule)
- Landlord and building insurance
- Tenant advertising costs
- Some travel expenses (limited and subject to rules)
Important: Deductions must directly relate to earning rental income — personal use or improvements that add value (capital works) are not immediately deductible.
3. Negative Gearing: A Smart Strategy or a Risk?
Negative gearing occurs when your rental property expenses exceed your rental income. This shortfall can usually be claimed as a deduction against your other income, reducing your overall tax bill.
While this can be useful for high-income earners, it’s not a guaranteed path to wealth.
It can work well if:
- You can manage the cash flow shortfall
- Your property grows in value over time
- You’re investing for the long haul
Strategy Insight: Think of negative gearing as part of a broader investment and tax strategy — not a shortcut to tax savings.
4. Capital Gains Tax (CGT): Plan for the Exit
When you eventually sell your investment property, any profit made (capital gain) is subject to Capital Gains Tax.
Key CGT rules to remember:
- Your main residence is generally CGT-free, but investment properties are not
- Hold the property for more than 12 months, and you may receive a 50% CGT discount
- You can use capital losses to offset gains
- Costs like stamp duty, legal fees, and renovations can reduce your CGT liability
Planning Tip: Timing the sale, ownership structure, and any improvements made over time can have a big impact on your CGT outcome.
5. Ownership Structure: It Matters More Than You Think
How you own your investment property directly affects how tax applies to income, losses, and capital gains.
Common structures:
- Individual ownership: Simple, but may push you into a higher tax bracket
- Joint ownership: Income and deductions are split based on legal ownership percentage
- Company or trust: Offers flexibility, asset protection, and estate planning — but comes with higher costs and complexity
Get Expert Advice: It’s easier (and cheaper) to structure it right from the start than to fix it later.
6. GST and Property Development: Be Careful
If you’re flipping houses or engaging in property development, the ATO might treat your activities as a business, not an investment. That brings GST obligations into play.
This could mean:
- Charging GST on sales of new or substantially renovated properties
- Claiming GST credits on construction costs
- Lodging Business Activity Statements (BAS)
Tip: If you’re unsure whether your activities count as a business or an “enterprise,” talk to a qualified advisor before you start.
Final Thoughts: Tax Should Support Your Strategy — Not Drive It
Tax isn’t the reason to invest — but ignoring it can seriously erode your returns. A well-planned property investment strategy that factors in tax from the beginning can give you a huge advantage over time.
At Certum Advisory, We Help Property Investors:
- Choose the right ownership structure
- Maximise deductions and improve cash flow
- Plan for CGT events
- Stay ATO-compliant and audit-ready
Ready to Invest Smarter?
Whether you’re buying your first rental or managing a growing portfolio, a clear tax strategy is essential. Talk to our expert advisors today and gain clarity, confidence, and compliance in your property investment journey.
Get in Touch with Certum Advisory
Let’s build your wealth — the smart way.
