The end of the financial year is one of the most important moments on the calendar for Australian property investors. With 30 June approaching, now is the time to review your investment properties, assess your deductions, and ensure your tax affairs are in order. A well-prepared end of financial year property tax strategy can meaningfully reduce your tax liability and improve the overall performance of your portfolio.
Why EOFY Matters for Property Investors
Property investors in Australia can claim a range of tax deductions related to their investment properties, but many are not fully utilising the deductions available to them. The annual tax return is the key opportunity to capture these benefits, and preparation in the weeks before 30 June can make a significant difference to the final outcome. Taking a proactive approach now, rather than leaving everything to your accountant after the year ends, gives you more time to act on any opportunities.
It is important to note that tax laws are complex and individual circumstances vary considerably. This is general information only and does not constitute financial advice. We recommend speaking with a qualified tax professional about your specific situation before making decisions based on any of the strategies discussed below.
Depreciation: A Key Deduction
Depreciation is one of the most valuable and frequently overlooked deductions available to property investors. It covers the decline in value of the building itself (capital works) and the fixtures and fittings within it (plant and equipment). Unlike most deductions, depreciation does not require you to spend money in the current year, as it represents the wearing out of assets already in place.
If you have not already had a depreciation schedule prepared for your investment property, arranging one before EOFY can unlock deductions for the current financial year as well as future years. A quantity surveyor can prepare an ATO-compliant schedule that identifies all eligible items and their depreciation rates. This is particularly valuable for properties purchased in the last five to 10 years, where the building and its contents are likely to still carry significant depreciable value.
Interest and Loan Costs
The interest you pay on loans used to purchase or improve an investment property is generally tax deductible. This is one of the largest deductions available to most investors and applies to both variable and fixed rate loans. If you have paid break costs to exit a fixed rate loan on your investment property, these may also be deductible in the year they were incurred.
Other loan-related costs that may be deductible include lenders mortgage insurance capitalised onto a loan, loan establishment fees, and ongoing loan management fees, though some of these are spread across the life of the loan rather than deducted in a single year. Your accountant can advise on how these costs should be treated for your specific situation.
Capital Works and Repair Deductions
Expenses related to maintaining and repairing your investment property may be deductible in the year they are incurred, provided they restore the property to its original condition rather than improving it. Repainting walls, fixing a leaking roof, or replacing broken fixtures are typical examples of deductible repairs.
Capital improvements are treated differently. Work that significantly improves the property, such as adding a room, installing a new kitchen, or upgrading the electrical system, is generally treated as a capital expense and claimed as a deduction over time rather than immediately. Understanding the distinction between a repair and a capital improvement is important, as the ATO examines this closely.
If you are planning any property maintenance or repair work, completing it before 30 June allows you to claim the deduction in the current financial year rather than the next. This is worth considering if the work is needed and can be reasonably scheduled.
Negative Gearing and How It Helps
Negative gearing occurs when the costs of holding an investment property, including interest, management fees, maintenance, and depreciation, exceed the rental income it generates. The resulting loss can be offset against other taxable income, reducing your overall tax liability. This is one of the reasons why property remains an attractive investment for many Australians on higher incomes.
With interest rates having risen over recent years, many properties that were previously positively geared have moved into negative territory. While this can feel uncomfortable from a cash flow perspective, it may create a tax benefit that partially offsets the higher holding costs. Reviewing your position with an accountant before EOFY can help you understand the net after-tax cost of your portfolio.
Review Before 30 June
In the weeks leading up to EOFY, it is worth reviewing several aspects of your investment position. Confirm that your property manager has supplied a full statement of income and expenses for the year. Check that all relevant invoices and receipts are collected and organised. Review any capital gains or losses from property sales during the year, as these may affect your overall tax position.
It is also a good time to review your loan structures with a mortgage broker. Refinancing to a lower rate before EOFY reduces the interest costs you carry into the new financial year, improving your cash flow from 1 July onward. If your fixed rate is expiring in the coming months, starting the refinancing process now avoids the typical delays that come with high demand periods.
How ALIC Can Help
At ALIC, we help property investors review and optimise their loan structures throughout the year, not just at EOFY. As an award-winning independent brokerage with access to more than 50 lenders, we can identify opportunities to reduce your interest costs, release equity, or restructure your lending in a way that supports your broader investment strategy. Get in touch with our lending strategists to make sure your financing is working as hard as your properties this financial year.
