Key Changes for FY2025-26
The Australian Tax Office has introduced several important changes for property investors this financial year. Whether you own one rental or a portfolio, these updates could significantly impact your tax position.
1. Depreciation Schedule Updates
The ATO has refined how Division 40 (plant and equipment) and Division 43 (capital works) deductions apply to second-hand residential properties. If you purchased a property after May 2017, the rules around claiming depreciation on existing fixtures remain unchanged — but the effective life tables have been updated for several common items.
Tip: Always get a professional quantity surveyor's report. It typically pays for itself many times over in deductions you'd otherwise miss.
2. Interest Deductibility Clarity
The ATO has issued new guidance on mixed-purpose loans. If you've redrawn funds from your investment loan for personal use, the interest on that portion is no longer deductible. Keep your investment and personal borrowings strictly separate.
3. Short-Stay Rental Reporting
Platforms like Airbnb and Stayz now report directly to the ATO. If you're earning short-stay rental income, make sure you're declaring every booking — the ATO's data matching is more sophisticated than ever.
4. Renovation vs Repair
The distinction between a repair (immediately deductible) and a renovation (capital improvement, depreciated over time) continues to trip up landlords. The key question: are you restoring something to its original condition, or improving it beyond that?
- Repair: Replacing broken tiles with like-for-like tiles
- Renovation: Replacing laminate benchtops with stone
- Repair: Fixing a leaking tap
- Renovation: Upgrading the entire bathroom
What You Should Do Now
Review your records before 30 June. Make sure every expense is categorised correctly, and keep all receipts digitally. Tools like Reezy Tracker can automatically categorise your expenses and flag potential deduction opportunities.