What Aussie Expats Can Actually Claim on an Australian Rental Property

If you own (or are eyeing off) an Australian investment property while living overseas, you’ve probably been told the magic word: deductions. Claim enough of them and your rental “loses” money on paper, which historically trimmed your tax bill. Lovely.

But here’s the thing nobody mentions when they’re spruiking property at a barbecue: the rules on what you can actually claim got tightened years ago, and tightened again in the 2026-27 Budget. A lot of the cheerful “just maximise your depreciation” advice floating around (including, frankly, the original version of this very article) is now flat wrong. So let’s go through what an expat can genuinely claim on an Australian rental, what’s been clawed back, and where the traps are.

The two buckets of deductions

Rental property deductions fall into two broad buckets, and the difference matters more than most people realise.

The first is cash deductions, the actual money leaving your pocket each year: loan interest, council rates, water rates, body corporate or strata fees, landlord insurance, property management fees, and repairs and maintenance. These are the bread and butter, and they’re generally claimable in the year you incur them.

The second is non-cash deductions, chiefly depreciation, where you claim the gradual decline in value of the building and its fittings without spending a fresh dollar that year. Depreciation is the one everyone gets excited about, and it’s also the one that’s changed the most. So let’s give it its own section.

Depreciation: where the old advice falls apart

Depreciation itself splits in two, and you need to know which is which.

Capital works deductions (the tax world calls this Division 43) cover the building’s structure: the bricks, concrete, walls and permanent fixtures. For eligible residential properties this is generally claimed at 2.5% a year over 40 years. This one is largely unchanged and still genuinely useful, especially on newer buildings.

Plant and equipment deductions (Division 40) cover the removable, mechanical bits: ovens, dishwashers, carpets, blinds, air conditioners, hot water systems. And here is the change that torpedoes the old “maximise your depreciation” pitch. Since 7:30pm on 9 May 2017, if you buy a second-hand residential property, you generally can no longer claim depreciation on the used plant and equipment that came with it. The ATO simply switched that deduction off for previously-used assets in established homes.

What you can still claim plant and equipment depreciation on: brand new assets you buy and install yourself (a new dishwasher, new carpet), and the plant and equipment in a brand new property. So the deduction didn’t vanish entirely, but the days of buying a 1990s unit and depreciating its tired old appliances are over. If you bought the property before that 9 May 2017 cut-off, you may be grandfathered on the existing assets, which is exactly the sort of thing worth checking rather than assuming.

A related casualty from the same 2017 crackdown: you can no longer claim travel costs to inspect or maintain a residential rental property. So no, that “quick trip back to check on the tenants” isn’t a deduction either.

How the deductions work for you as a non-resident

Here’s the bit that’s specific to expats. Your Australian rental income is taxable in Australia whether you’re a resident or not, and you claim the deductions above against that rent in the usual way. If the deductions exceed the rent, you’ve made a rental loss.

What happens to that loss is where it gets interesting, and where the latest Budget changes everything (more below). Historically, a rental loss could be offset against your other Australian-sourced income, and any excess carried forward to future years. But note the rate card too: as a non-resident you’re taxed at non-resident rates with no tax-free threshold, so the value of a deduction to you isn’t the same as it would be for a resident. The maths of negative gearing genuinely changes once you’re overseas.

The 2026-27 Budget: the deductions still exist, but the loss is on a leash

This is the development that reshapes everything above, so pay attention.

From 1 July 2027, negative gearing on residential property is restricted to new builds. For a property caught by the new rules (broadly, one bought after 7:30pm AEST on 12 May 2026 that isn’t a qualifying new build), the deductions themselves still exist, but a resulting loss can no longer be used to reduce your salary or other income. Instead, it’s quarantined, usable only against future residential rental income or against capital gains when you sell residential property.

If you already held the property before that 12 May 2026 cut-off, you’re grandfathered and can keep negatively gearing it the old way until you sell. And running alongside all this, the 50% capital gains tax discount is being scrapped from 1 July 2027, which matters because some of those quarantined losses are designed to be used against capital gains that will themselves be taxed differently. The two changes interlock, and we’ve laid out the full picture in our Australian Expat Tax Changes – 2026 Budget Guide for Expats.

The practical upshot for record-keeping

None of these deductions are worth a cent if you can’t substantiate them, and the ATO loves auditing rental claims. So keep everything: loan statements showing interest, rates and strata notices, insurance and management invoices, receipts for repairs, and (crucially) a professional depreciation schedule from a qualified quantity surveyor if your property qualifies for meaningful depreciation. That schedule is itself tax deductible and routinely pays for itself, but only commission one where there’s genuinely something to claim, which, post-2017, isn’t every property.

The bottom line

Yes, expats can claim the usual rental deductions: interest, rates, insurance, management, repairs and capital works depreciation. But the easy “maximise your depreciation” era ended in 2017 for second-hand homes, travel to inspect your rental is gone, and from 1 July 2027 a rental loss on a non-grandfathered, non-new-build property gets quarantined rather than offsetting your other income. The deductions are real. They’re just more boxed-in than the old sales pitch admits.

Tread your own path. Just keep the receipts and check which rules your property falls under before you bank on a refund.

Not sure what your property can actually claim? Let’s check.

What you can claim depends on when you bought, whether the property is new or established, whether you’re grandfathered under the Budget changes, and your residency status. Get a deduction wrong and the ATO will let you know; miss one you’re entitled to and you’ve left money on the table.

Our specialist expatriate tax team prepares Australian rental schedules and returns for expats all over the world, entirely remotely, and we’ll make sure you claim everything you’re entitled to and nothing you’re not.

Book an appointment with our expat tax specialists today and get your rental deductions sorted properly. Your future self, and your hip pocket, will thank you.

General information only. This article doesn’t consider your personal circumstances and isn’t tax, financial or credit advice. The 2026-27 Budget measures had not been fully enacted at the time of writing and the detail may change. Speak to our specialist expatriate tax team today, or another registered tax agent, before acting.

References

1. Australian Taxation Office, “Second-hand depreciating assets” (the 7:30pm 9 May 2017 limit on decline-in-value deductions for used assets in residential rental properties): ato.gov.au
2. Australian Taxation Office, “Rental property expenses” (deductible holding costs, repairs, capital works and the removal of travel deductions for residential rental property): ato.gov.au
3. Australian Taxation Office, “Capital works deductions” (Division 43 building write-off at 2.5% over 40 years): ato.gov.au
4. Australian Government, Budget 2026-27, “Negative Gearing and Capital Gains Tax Reform” fact sheet (negative gearing restricted to new builds from 1 July 2027, the 12 May 2026 grandfathering cut-off and loss quarantining): budget.gov.au