Investment property is one of the few assets in Australia that generates income while also creating a range of tax deductions to offset it. Used well, the result is a lower taxable income — and in some cases, a net tax saving across the whole financial year. Used carelessly, it becomes a cash-flow drain dressed up as a tax strategy.
This article covers the main deductible levers available to Queensland investment property owners, how depreciation works in practice, and how the structure of your rental model affects both your gross income and your taxable position.
The Main Deductible Levers
The ATO allows investment property owners to deduct a wide range of expenses against rental income. The most common and significant are:
- Mortgage interest — the interest component of any loan used to purchase or improve the investment property is fully deductible. Principal repayments are not.
- Depreciation — a non-cash deduction for the wear and tear of the building structure and fittings (covered in detail below).
- Repairs and maintenance — ongoing maintenance to keep the property in its current condition is deductible in the year incurred. Capital improvements are not immediately deductible.
- Property management fees — fees paid to a property manager for tenant sourcing, rent collection, and routine inspections are fully deductible.
- Council rates and water charges — fully deductible for the periods the property is rented or available for rent.
- Landlord insurance — the cost of building and landlord insurance is deductible.
- Advertising and letting fees — costs to find new tenants are deductible.
Eleva's property income model delivers above-market returns with full investment property tax treatment.
Explore the income model →How Depreciation Works
Depreciation is the most commonly under-claimed deduction on investment property. Unlike other expenses, it requires no cash outlay — it's a paper deduction that reflects the declining value of the physical asset over time.
There are two categories:
- Division 40 — Plant and equipment: Covers removable fixtures and fittings — appliances, carpets, blinds, hot water systems. Each item is depreciated at its effective life rate, typically over 5–15 years depending on the asset type.
- Division 43 — Capital works: Covers the building structure itself — walls, roof, floors, fixed fittings. For residential properties constructed after 15 September 1987, the deduction rate is 2.5% per year of the original construction cost, for up to 40 years.
A quantity surveyor can prepare a depreciation schedule for a few hundred dollars. On a property with recent construction or significant fitout, this schedule can unlock thousands of dollars in annual deductions that would otherwise go unclaimed.
The Negative Gearing Trade-Off
When deductible expenses exceed rental income, the property is negatively geared — and the resulting loss can typically be offset against other income, reducing your overall taxable income. This is the core of most Australian property investment tax strategies.
The trade-off is real: a negatively geared property is, by definition, costing you money each month. The tax saving softens that cost — but it doesn't eliminate it. A property generating $25,000 in rent with $35,000 in deductible costs produces a $10,000 tax loss. At a 37% marginal rate, that saves roughly $3,700 in tax. You still have a $6,300 annual cash shortfall before capital growth is considered.
Negative gearing works when capital growth outpaces the cash-flow cost. In flat or declining markets, it becomes a drain with no offsetting upside.
Co-Living and Higher-Yield Structures
A co-living or rooming accommodation model leases individual rooms rather than the whole property, typically generating 30–60% more gross rental income than a standard whole-property lease. Critically, the same tax deductions apply — interest, depreciation, management fees, insurance, rates.
The higher gross income can tip a negatively geared property into a positively geared one — meaning you pay tax on a net profit, but you're also receiving a stronger cash return. Whether positive or negative gearing is more favourable depends on your marginal tax rate and overall financial position.
Eleva's Property Income Model
Eleva converts standard residential properties into professionally managed co-living arrangements. We handle tenant sourcing, compliance, maintenance, and day-to-day management. You receive an above-market return without self-managing tenants. The income is treated as standard investment property income — all the same deductions apply. Learn more about the property income model.
This is general information only. Speak to your accountant or tax adviser before making financial decisions.