How to Ensure Your Landlord Deductions Pass ATO Scrutiny

With the Australian Taxation Office (ATO) placing landlord deductions under increasing scrutiny, property owners—particularly Aussie expats and offshore investors—must ensure their claims are accurate, justifiable, and well-documented. Each year, the ATO flags millions in incorrect or overstated rental deductions, often due to common misunderstandings about what’s deductible and what’s not.

At World Wide Advisory, we work with expats and international property investors to ensure property ownership and rental income are compliant, tax-efficient, and audit-ready.

Here’s how you can stay on the right side of the ATO while maximising your eligible deductions.

📚 Maintain Accurate and Complete Records

The first line of defence in an audit is meticulous record-keeping. Whether you own one property or a portfolio, every deduction must be backed by:

• Invoices and receipts for expenses

• Bank statements showing payment transactions

• Contracts or lease agreements

• Loan documentation for interest deductions

• Depreciation schedules prepared by a qualified quantity surveyor

💡 Tip: Use cloud-based accounting or property management software to centralise and organise records year-round.

🧾 Understand What You Can Claim

The ATO permits landlords to deduct expenses directly related to earning rental income. These can include:

• Council rates and water charges

• Property management fees

• Repairs and maintenance (but not improvements)

• Loan interest (not principal)

• Insurance premiums

• Depreciation on eligible assets (e.g., appliances, carpets)

• Travel costs (only in limited circumstances for certain types of investors)

For expats, foreign exchange and remittance costs related to property income may also be claimable—provided the right evidence is maintained.

🔨 Capital vs Non-Capital Expenses: Know the Difference

One of the most common pitfalls for landlords is incorrectly claiming capital expenses as immediate deductions.

✅ Non-Capital (Immediate) Deductions:

• Fixing a broken appliance

• Replacing a section of damaged fencing

• Patching and painting due to tenant wear and tear

🚫 Capital (Depreciated or Added to Cost Base):

• Renovating a bathroom

• Installing a new air conditioning system

• Structural improvements

These capital works must generally be claimed over time under Division 43 (Capital Works) or added to the cost base for Capital Gains Tax purposes.

💡 Expats Take Note: If you're no longer a tax resident, certain CGT discounts no longer apply, so accurate cost base tracking becomes even more important for your exit strategy.

🌎 For Aussie Expats: Keep ATO Rules Front of Mind

Owning property while living overseas introduces a layer of complexity. Considerations include:

• Foreign currency conversion of income and expenses

• Rental income reporting even if it never hits an Australian bank account

• Exposure to land tax traps across multiple states

• CGT on departure, especially if the property was your former residence

Missteps here often lead to ATO audits. We frequently assist clients with preemptive reviews to mitigate such risks.

📌 Practical Tips to Stay Compliant

• Perform an annual property expense review with your tax advisor

• Engage a qualified quantity surveyor for an up-to-date depreciation schedule

• Separate repairs (deductible) from upgrades (capital) in your accounting

• Declare all rental income, including Airbnb or short-term rental platforms

• Don’t rely solely on property managers—review your own documentation regularly

🚨 ATO Red Flags for Landlords

Avoid triggering an audit by being mindful of these common red flags:

• Claiming deductions for vacant properties

• Inflated repairs or travel expenses

• Failing to report overseas income tied to Aussie property

• Using incorrect apportionments for shared-use properties (e.g., renting part of your home)

If you’re unsure, a professional tax review before filing can prevent costly mistakes.

🧠 Expert Tax Planning for Property Owners

At World Wide Advisory, we help:

• Aussie expats navigate their rental deductions, CGT exposure, and re-entry tax planning

• Foreign investors understand local property tax implications and compliance rules

• Landlords and businesses prepare for and defend against ATO audits with confidence

📞 Call us today at +61 7 3180 1684

📧 Email contact@worldwideadvisory.au

Let us help ensure your property deductions are accurate, compliant, and audit-ready—for this tax year and beyond.