This week, the ATO sent tax agents across the country a heads-up. Some taxpayers who first reported a rental property in their 2025 income tax return will soon receive an email from the ATO pointing them to a new fact sheet (NAT 75819-04.2026, also catalogued as QC 107238) titled Record keeping for rental properties, published as part of the ATO’s Tax Time Toolkit for Investors.
That isn’t random. The ATO is clearly trying to get ahead of rental property record-keeping issues before the next return cycle.
The fact sheet is genuinely useful. It’s a clean checklist of what documents to keep at each stage of property ownership: when you buy, when you start renting, every year you own it, and when you eventually sell. About forty items across four pages, organised by lifecycle. If you’re a first-time landlord and you’ve been making it up as you go, the fact sheet tells you exactly what to dig out of your filing cabinet, your inbox, or the back of an envelope before you forget.
But that’s also its limitation.
The fact sheet tells you what to keep. Not what’s deductible.
There’s a difference. And the difference is where most rental property tax mistakes actually live.
The fact sheet, for example, tells you to keep “details of any redraws (and what it was for)”. Sensible. But what it doesn’t tell you is that if any of those redraws were used for private spending, you may only be entitled to a partial interest deduction on the loan. The records the fact sheet asks for are evidence. The analysis of what those records mean for your tax position is a separate exercise entirely. And it’s the analysis, not the record-keeping, that triggers the ATO data-matching letters.
The fact sheet tells you to keep “receipts and invoices for any repairs you’ve made to the property before renting it out”. Equally sensible. But what it doesn’t tell you is that pre-rental repairs may be “initial repairs” if they remedy defects, damage or deterioration that existed when you acquired the property, or that arose while the property was used privately. Under the leading High Court case of W Thomas & Co Pty Ltd v FCT (1965) 115 CLR 58 and ATO Taxation Ruling TR 97/23, initial repairs are capital in nature, not immediately deductible under section 25-10 of the Income Tax Assessment Act 1997. You should still keep the records. They may form part of the CGT cost base, or be relevant to capital works or depreciating asset claims. But they are not simply a current-year repair deduction.
The fact sheet tells you to keep records of expenses generally. But it doesn’t mention section 26-31 of the Income Tax Assessment Act 1997, which has, since 1 July 2017, denied a deduction for travel expenses related to residential rental properties for most individual landlords. So you keep the travel receipts. They’re just not deductible in the usual mum-and-dad landlord scenario. Section 26-31 also prevents those denied travel expenses from being added to the property’s CGT cost base or reduced cost base.
You can see the shape of this. The fact sheet does one job (what to keep) and does it well. The other job (what those records mean for your tax position) sits one layer above it, and that’s the layer where rental property tax mistakes actually live.
What this means if you own Australian property from overseas
There’s one line in the fact sheet that’s particularly worth reading slowly if you’re an Australian resident with property overseas, or a foreign national with property in Australia:
“You must declare all income you receive for your rental property (including overseas properties) in your tax return.”
If you’re an Australian tax resident with property in another country, this isn’t a polite reminder. The ATO has data-sharing arrangements with most major economies through the Common Reporting Standard, automatic exchange of financial account information and tax treaty information requests. Whether your Australian property generates net rent or a loss, whether your foreign property does the same, both need to be on your return if you’re an Australian resident.
If you’re a foreign resident who owns Australian property, the ATO’s domestic data programs, including rental bond data, property management data and residential investment property loan data, give it extensive visibility over Australian rental properties. And since 1 January 2025, the Foreign Resident Capital Gains Withholding regime has become broader: the withholding rate is 15%, and the former $750,000 property threshold has been removed.
In practical terms, where Australian real property is sold, the purchaser generally needs to withhold 15% of the sale price and remit it to the ATO unless the vendor provides a valid clearance certificate, or the ATO has issued a variation reducing the withholding amount. The withholding is not the final tax. It’s a collection mechanism. Your actual CGT position is still worked out in your Australian income tax return.
Which is why the cost base records the fact sheet asks you to keep matter substantially more under the new regime: they determine the gap between the rough withholding amount and your final assessed tax.
The fact sheet doesn’t engage with any of this. It’s not designed to. But the compliance picture for cross-border landlords is bigger than a checklist, and the ATO’s data sources now extend well beyond what taxpayers voluntarily type into a tax return.
What to do this week
If you received the ATO’s letter about your rental property recently, or if you’ve received one in previous years, or if you’re a long-time landlord who’s never had a formal review of your records, the action item is the same.
Run through the ATO’s checklist first. It’s a sensible baseline.
Then, separately, ask yourself the harder questions:
- Are my interest deductions properly apportioned for any private use of borrowed funds, including redraws and refinances over the years?
- Have I correctly distinguished repairs from improvements and initial repairs across the life of the property?
- Have I correctly disregarded travel expenses that are non-deductible under section 26-31, including airfares, accommodation and local travel?
- Have I captured every cost base element I’ll need when I eventually sell, including capital improvements, building reports, legal fees, and any capital items not previously claimed?
If the honest answer to any of those is “I’m not sure”, that’s where to start.
The bottom line
The ATO contacting first-time landlords before lodgement season is a tactical change. The bigger story is that the ATO no longer waits until after lodgement to start a compliance conversation. The conversation now starts before 30 June, with a fact sheet that signals the topics under review.
That’s actually useful. The ATO is publishing what it’s looking at. Anyone who reads the fact sheet and treats it as a finishing line is missing the point. The fact sheet is the starting line. The work of getting the file properly compliant happens after the checklist is done, in the layer of tax treatment the fact sheet deliberately doesn’t address.
For a deeper treatment of the five rental property tax mistakes that most commonly catch expat landlords, including the interest apportionment, repairs and travel issues outlined above, see our detailed article on the 2026 rental compliance focus, Rental Property Tax Mistakes Catching Expat Landlords.
And if you’re not confident your rental property records and deductions are properly aligned, this is the right moment to fix it. The corrections you can make in the current financial year are still in your hands. After 30 June, the timing belongs to the ATO.
Get the file reviewed before 30 June
We’ve spent over 20 years advising Australian expat landlords specifically. If you received the ATO’s email, or if you’re a long-time landlord who’s never had a formal review of your file, this is the moment to get it sorted. Generic advice isn’t good advice. Let us know your circumstances. We’ll analyse your facts and provide specialist advice specific to your unique situation.
- ATO Rental Record-Keeping Fact Sheet: What’s Missing - 21/05/2026
- Rental Property Tax Mistakes Catching Expat Landlords - 20/05/2026
- 2026 Budget: 30% Minimum Tax on Discretionary Trusts - 17/05/2026
