The ATO has highlighted three common areas of error: loan interest, repairs and private use. Checking them now can help you keep the right records well before the financial year ends on 30 June.

1. Follow the borrowed money

Interest deductions depend on how borrowed funds are used, not simply which property secures the loan.

If you redraw from a rental-property loan for school fees or a holiday, interest on that private portion is not deductible. Rental-related and private interest must be apportioned, including after refinancing.

Keep loan statements and evidence of how funds were spent. Before a redraw or refinance, ask your accountant how it will affect future claims.

2. Distinguish repairs from improvements

Work restoring wear or damage arising from renting out the property may qualify for an immediate repair deduction.

Improvements and replacement of an entire structure are generally capital expenditure. Eligible building work is usually deducted over time through capital works allowances, commonly over 40 years. Separate new assets, such as appliances, generally fall under depreciation rules, subject to eligibility and any immediate-deduction provisions.

Fixing defects that existed when you bought the property is an initial repair, not an immediate repair deduction even if you discovered them later.

Keep itemised invoices so we help you distinguish between repairs, improvements and new asset purchases.

3. Account for private use

Expenses must reflect the property’s income-producing use. Personal stays, renting only part of a property or leasing to family or friends below market rates can affect available deductions.

Below-market arrangements generally limit deductions to the rent received.

Co-owners generally allocate income and expenses according to their legal ownership interests.

For an ordinary rental property, vacancy alone does not rule out deductions if it remains available for rent on commercial terms. We recommend that you retain advertising and availability records.

Holiday homes need an additional check: the ATO says ownership and use expenses are not deductible unless the property is used or held mainly to produce rental income. Where that requirement is met, private-use apportionment still applies.

Make the records work for you

Keeping loan records, itemised invoices and a calendar of rental availability and private stays helps support an accurate return.

Contact Count Gold Coast’s Tax and Accounting team before changing your loan, undertaking property work or arranging private use. We can explain the likely treatment and the records to retain.

General information disclosure

This article provides general information only and does not constitute taxation, accounting, financial or legal advice. Deductibility depends on your circumstances, the use of borrowed funds and the property, the nature of expenditure, and the applicable law. Obtain advice tailored to your circumstances before acting or making a claim. Information is current at 6 November 2026 and may change.

Sources

Australian Taxation Office - Top 3 rental property deduction errors

Australian Taxation Office - Repair and maintenance expenses

Australian Taxation Office - How to claim rental expenses

Australian Taxation Office - Deductions for a rental property that is not a holiday home

Australian Taxation Office - Holiday homes

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