Rental property tax mistakes can leave you with rejected deductions, extra tax and a return that needs correcting.

Before lodging your 2025–26 tax return, check more than the total on your property manager’s annual statement. For example, that statement may leave out expenses you paid yourself, private stays, loan redraws or income from other sources.

However, copying last year’s figures will not solve those gaps. Your claims must reflect the income, expenses and property use for 2025–26.

Use these seven checks to review your figures before you approve the return for lodgement.

1. Leaving Income Out of Your Rental Property Tax Return

Start with the gross rent, not just the net amount your property manager transferred to your bank account.

For example, a manager may deduct fees and repair costs before paying you. You still report the gross rental income, then claim eligible expenses separately.

Also check bond money you keep for unpaid rent or damage, insurance that replaces lost rent and tenant reimbursements. In addition, review short-stay income and cancellation fees you retain.

The ATO’s rental income guidance explains which receipts to include.

Next, compare your agent statement with bank records and booking-platform reports. If you used several platforms, check each one. Small or irregular payments can still count as rental income.

Finally, give your accountant details of unusual receipts, including compensation or property-related rebates. Do not assume that every receipt has the same tax treatment.

2. Overclaiming Rental Property Tax Deductions for Private Use

You cannot claim the private portion of rental expenses. Therefore, check how you used the property throughout the year.

Your claims may need adjustment if you:

• stayed at the property yourself
• reserved dates for family holidays
• let friends or relatives stay free or below market rent
• rented out only part of the home
• restricted bookings or set rent so high that you were unlikely to attract tenants.

A vacant property can still qualify for some deductions if you genuinely offer it for rent on commercial terms. However, an online listing alone does not prove that every vacant day qualifies.

Keep advertisements, booking enquiries and a calendar of rental and private-use dates. These records help support a fair split of expenses under the ATO’s rental expense guidance.

Holiday homes need closer review. The ATO’s updated rental property guidance explains why private holiday use can restrict certain ownership costs, not just reduce a claim by private-use days.

For your 2025–26 return, also ask your accountant to check the transitional approach for holiday-home expenses incurred before 1 July 2026. Do not assume the same treatment applies to expenses from 1 July onwards.

3. Claiming Interest on Private Borrowing

A loan does not qualify for a rental deduction simply because the bank holds your investment property as security.

Instead, check what you used the borrowed money for.

For example, you might redraw money from a rental loan to buy a private car. As a result, interest on that private portion does not become deductible just because the original loan funded a rental property.

Similarly, refinancing can create a mixed-purpose loan if you borrow extra money for personal spending. You then need to separate the rental and private interest.

Before completing your rental property tax return:

• check the original borrowing and any refinancing
• identify each private redraw
• separate interest charges from principal repayments
• give your accountant the full loan history.

Importantly, do not assume that paying money back into a mixed loan clears the private portion first. Ask your accountant to check the calculation.

The ATO’s interest expense guidance explains the treatment of private and rental borrowing.

4. Treating Improvements as Immediate Deductions

Not every property expense belongs in the repairs section of your rental property tax return.

For example, repairing part of a damaged structure differs from replacing the whole structure. Likewise, renovating a kitchen can involve capital costs rather than an immediate repair deduction.

Review these categories separately:

• Repairs and maintenance: eligible work may qualify for an immediate deduction.
• Capital works: qualifying building and structural costs generally attract deductions over time.
• Depreciating assets: eligible assets may qualify for decline in value deductions.
• Borrowing expenses: these may require claims spread over time.
• Purchase and sale costs: some may form part of the property’s capital gains tax cost base.

Also check for initial repairs. These address defects or damage that existed when you bought the property. As a result, these costs generally do not qualify as immediate repair deductions, even if you needed the work before tenants moved in.

Before claiming, ask the contractor for an itemised invoice. Then compare the work with the ATO’s repairs and maintenance guidance.

5. Including Travel You Cannot Claim

Most individual residential property investors cannot claim travel costs for inspecting, maintaining or collecting rent from their properties.

As a result, paying for a flight or driving to an inspection does not automatically create a rental property tax deduction.

The restriction can cover car expenses, flights, accommodation, meals, taxis and rideshare fares.

However, exceptions exist for certain entities and circumstances, including qualifying business activities. Simply owning several rental properties does not automatically make your activity a business.

Before including travel, check whether an exception actually applies to you. The ATO’s rental property travel guidance explains the restrictions.

If you are unsure, flag the cost for review instead of adding it to your deductions.

6. Splitting Rental Property Tax Figures Incorrectly

Co-owners generally divide rental income and most expenses according to their legal ownership interests when they hold the property as an investment.

For example, joint tenants hold equal interests. Tenants in common may hold unequal shares.

However, paying more of the mortgage or covering a repair bill does not automatically entitle one owner to claim a larger share of the rental loss.

Therefore, start with the ownership documents. Then check that each return reflects the correct share of income and expenses.

Also tell your accountant about loans that individual owners took out to buy their own interests. In that case, the interest claims can require separate treatment.

The ATO’s 2026 rental property guide covers co-ownership and rental expenses.

If a company, trust or rental business holds the property, seek advice on that structure. Do not apply the individual co-owner rules without checking.

7. Lodging Without Complete Rental Property Tax Records

A property manager’s statement gives you a useful starting point. However, it may not show expenses you paid directly or changes in how you used the property.

For that reason, gather the following before lodging:

• annual agent statements and short-stay platform reports
• leases, rent records and bank statements
• loan, refinancing and redraw documents
• council rates, water charges and land tax notices
• insurance invoices, claims and payments
• body corporate statements
• itemised repair and improvement invoices
• asset receipts and depreciation schedules
• construction cost records
• booking calendars and private-use dates
• ownership, purchase and sale documents.

Keep a separate set for each property. Also back up digital records so you can find them later.

The ATO’s rental record-keeping guide explains the five-year retention rules and when the period starts. Some records remain relevant long after the year you first receive them.

For a broader preparation list, use our tax records checklist.

Review Your Rental Property Tax Return Before Lodging

Do not leave unanswered questions until the day you plan to lodge.

First, send your accountant the complete records for each property. Next, flag private stays, discounted rent, loan redraws, major works and any purchase or sale during the year.

Finally, review the draft return against those records. Check the gross rent, ownership share and deductions before you approve it.

If a statement or invoice is missing, request it now. Early action gives you more time to resolve the issue before your lodgement deadline.

How HarvestWise Accounting Can Help

HarvestWise Accounting can help review your rental property tax position and prepare your 2025–26 income tax return.

We can check rental income, loan interest, private-use periods, expense categories and supporting records. Where a claim needs closer review, we can identify which extra records we need.

If you need help with your rental property figures, contact HarvestWise Accounting before lodging.

General information only. Tax outcomes depend on your circumstances. Speak to a registered tax professional for advice.