Understanding tax deductions for Northern Districts investment properties

Owning an investment property in Sydney's Northern Districts can offer strong long-term returns, especially when you're making the most of available tax deductions.

Whether you're a seasoned investor or just starting out, understanding how deductions work in 2025 can make a real difference to your bottom line.

What can you claim?

Investment property owners can claim a range of deductions, many of which help offset the ongoing costs of holding a property. These include:

• Loan interest: The interest on your investment property loan is tax deductible, provided the loan was used to purchase, build, or renovate the property.
• Property management fees: If you're using a professional to manage the property, their fees are deductible.
• Maintenance and repairs: Necessary repairs and general maintenance costs can usually be claimed in the same financial year they're incurred.
• Depreciation: You may be able to claim depreciation on the building structure and certain fixtures and fittings. A quantity surveyor’s report can help maximise this deduction.
• Insurance and council rates: Landlord insurance, building insurance, water rates, and council fees are all deductible.
• Advertising for tenants: Costs related to finding new tenants, such as online listings or signage, can be claimed.
• Travel expenses: While travel deductions for residential property were removed in 2017 for most investors, some may still apply under specific business structures—check with your tax adviser.

For investors buying in 2025

If you're purchasing an investment property this year, make sure you're planning for deductions from the outset:

• Get a depreciation schedule early: Ordering this soon after settlement can help you claim everything you're entitled to.
• Consider ownership structure: Whether you buy in your own name, a trust, or a company affects how deductions are applied and taxed.
• Loan structuring: Consider whether an interest-only loan suits your cash flow and tax goals. Offset accounts may also help reduce interest while keeping funds accessible.
• Pre-purchase costs: Some costs incurred before settlement, such as inspections or legal advice, may not be deductible immediately—but could form part of your cost base for capital gains tax (CGT) down the track.

For investors selling in 2025

When the time comes to sell your investment property, it’s important to understand the tax implications:

• Capital gains tax (CGT): If your property has increased in value, you may be liable for CGT. However, if you’ve owned it for more than 12 months, you may be eligible for a 50% discount.
• Depreciation recapture: Some deductions claimed through depreciation may need to be added back when calculating your CGT—check with your accountant.
• Selling expenses: Costs like agent fees, marketing, legal fees, and conveyancing can reduce your capital gain.
• Timing your sale: If you're nearing the end of a financial year, selling just before or just after 30 June could influence your taxable income for that year.

Changes and reminders for 2025

The ATO has continued its focus on property investors, so it’s more important than ever to keep detailed records. Some things to keep in mind:

• Immediate vs capital works deductions: Know the difference. For example, replacing a broken oven might be deductible immediately, while a full kitchen renovation needs to be claimed over several years.
• Interest-only loans: If you're switching from interest-only to principal and interest, only the interest portion remains deductible.
• Private use: If you or family members use the property at any point, you’ll need to adjust your claims to reflect that.
• Record-keeping requirements: The ATO now expects more detailed supporting evidence for deductions—retain receipts, contracts, depreciation schedules, and correspondence.
• New builds and off-the-plan purchases: These often come with generous depreciation benefits, especially in the first few years. A professional schedule is essential to make the most of this.

How a good property manager can help

An experienced property manager does more than just oversee tenants—they can play a valuable role in helping you stay on top of your tax deductions:

• Accurate record-keeping: A property manager keeps track of all rent payments, outgoing expenses, maintenance costs and invoices—making it easier to prepare for tax time.
• Expense reporting: At the end of each financial year, you'll receive a comprehensive summary of your property's income and expenses, often formatted to streamline your tax return.
• Maintenance coordination: They can ensure repairs and maintenance are handled promptly and documented correctly—helping you claim deductions without delays.
• Compliance with ATO expectations: Property managers can provide key documentation such as lease agreements, inspection reports, and rent schedules, which are increasingly important for substantiating claims.
• Maximising returns: By advising on market rent, tenant turnover, and upkeep strategies, your manager helps you maintain a consistent income stream—essential for cash flow and tax planning.

Get professional advice

Every property is different, and so is every investor's financial situation. Working with a tax adviser or accountant who understands property investment in the Northern Districts can help ensure you're claiming everything you're entitled to—without crossing any lines.

Making the most of your tax deductions isn’t just about saving money—it’s about building a smarter, more sustainable investment strategy that works for you over the long term.

Important note: The article provides general information only and does not constitute financial or tax advice. You should consult a qualified tax adviser or accountant before making decisions based on this information. 

Thinking of selling your Northern Districts home?

If you're considering selling your home in Sydney’s northern districts, get in touch with Page & Co. Our team understands what buyers are looking for and can help you present your property to maximise its value.