The moves your clients make in the next few weeks could save them thousands. The ones they don’t make may cost them just as much.
June has a habit of arriving faster than anyone expects. One week you’re telling yourself you’ll get organised before EOFY, the next week it’s the 28th and the window is closing.
Most property investors don’t lose money at tax time because they’re careless. They lose it because they run out of runway. They meant to commission the depreciation schedule. They meant to prepay the insurance. They meant to check in with their accountant before June.
This article is written for the advisors and brokers who want to have those conversations with their clients now, while there’s still time to act.
Please note: this is general information, not tax advice. Your clients should always work with a qualified accountant or tax adviser for their individual circumstances. What we can do is give you the framework for a better conversation.
NEGATIVE GEARING: UNDERSTAND WHAT THEY’RE HOLDING AND WHY
Negative gearing is one of those terms that gets used constantly in Australian property but isn’t always well understood by the people it applies to. The simple version: if your investment property costs more to hold than it earns in rent, the shortfall (the loss) can be offset against your other income, reducing the total tax you pay.
In a 4.1% rate environment, more investors are negatively geared than at any point since the tightening cycle began. That’s not comfortable news for cashflow. But it does have a silver lining that’s worth making explicit with clients: higher interest costs mean larger deductions, which means a bigger reduction in taxable income.
The goal of negative gearing isn’t to lose money. It’s to hold a quality asset for long-term growth while the tax system reduces the cost of doing so.
The EOFY job here is straightforward but frequently incomplete: make sure every deductible expense is actually being captured. Most investors claim the obvious ones. The ones that get missed are often the small, recurring costs that add up significantly over a full year.
Two things worth reinforcing with clients who are negatively geared and nervous about it. First, the tax benefit is real, but it doesn’t eliminate the out-of-pocket cost – it reduces it. A client losing $500 per month on an investment property before tax, in the 37% bracket, has an effective after-tax holding cost closer to $315 per month once the tax offset is applied. That’s still a cost. The question is whether the long-term capital growth and rental income trajectory justifies it – and for well-located property in markets like South East Queensland, Adelaide and Melbourne’s growth corridors, the evidence has consistently said yes.
Second, negative gearing is a strategy for holding quality assets, not a strategy for holding poor ones. The tax benefit doesn’t make a bad location good. It makes a good location more affordable to hold while it grows. That distinction matters, and it’s worth saying clearly.
DEPRECIATION: THE DEDUCTION MOST CLIENTS ARE UNDERCLAIMING
Depreciation is one of the most valuable tax deductions available to Australian property investors and one of the most consistently underused. A quality tax depreciation schedule from a registered quantity surveyor typically unlocks $10,000 to $18,000 in deductions in year one on a quality new build. Over five years, that compounds into tens of thousands in legitimate tax savings.
There are two components. Division 43 covers the building structure itself, claimable at 2.5% of the original construction cost per year, for up to 40 years, on buildings constructed after 15 September 1987. Division 40 covers plant and equipment (carpets, blinds, hot water systems, air conditioning, appliances), each depreciating over its ATO-assessed effective life.
The depreciation schedule itself costs approximately $700 and is fully tax-deductible. A $700 investment that unlocks $12,000 in deductions for a client in the 37% tax bracket delivers a real cash saving of around $4,440 in year one alone, a return of more than 6x in the first year.
| Property type | Division 40 entitlement | Division 43 entitlement |
| New house & land package | Full entitlement – all new assets claimable | Full entitlement – construction after 1987 |
| Established (purchased post 9 May 2017) | New assets only – not those at purchase | Full entitlement if built post 1987 |
| Established (purchased pre 9 May 2017) | Full entitlement on existing assets | Full entitlement if built post 1987 |
Two groups most commonly miss out: investors who purchased in the last two years and never commissioned a schedule, and those who have renovated or added assets since their original report was prepared. An outdated schedule leaves deductions on the table every year it sits unchanged.
PREPAY DEDUCTIBLE EXPENSES BEFORE 30 JUNE
Individual property investors can prepay up to 12 months of deductible expenses in advance and claim them in the current financial year. It’s one of the most straightforward and consistently overlooked ways to reduce taxable income before the 30 June deadline.
With the RBA cash rate sitting at 4.1%, mortgage interest on investment loans is likely to be the single largest deductible expense many clients carry. Prepaying a month of interest before 30 June brings that deduction forward, reducing this year’s taxable income rather than next year’s. For a client with a $600,000 investment loan at 6.5%, that’s approximately $2,600 in deductions moved from the 2026/27 year into 2025/26.
What can be prepaid:
- Landlord and building insurance renewals
- Property management fees
- Investment loan interest (check with lender – not all accept prepayment)
- Pest and building inspection fees
A note on repairs versus capital improvements, because this is the distinction the ATO is watching most closely in 2025/26.
Any genuine repair work completed and paid before 30 June is immediately deductible. A repair restores something to its original working condition, replacing a broken window, fixing a leaking tap, repainting a wall. Work that improves or upgrades the property beyond its original state is capital in nature and must be depreciated over time, not claimed immediately.
Clients who try to claim a new kitchen, a bathroom renovation or a structural addition as an immediate repair are claiming incorrectly, and the ATO’s data-matching systems are increasingly capable of identifying the pattern. Getting this wrong loses the deduction and triggers an audit.
INTEREST DEDUCTIONS: GET THEM CLEAN BEFORE LODGEMENT
Interest on investment loans is one of the most significant deductions available to property investors and one of the most frequently miscalculated. The ATO has explicitly identified interest deductions following loan redraws for private purposes as a priority compliance focus for 2025/26.
The rule is straightforward in principle: interest is only deductible to the extent the loan is being used for investment purposes. In practice, it becomes complicated the moment a client has ever redrawn on their investment loan for a personal reason; renovating the family home, funding a holiday, paying a personal debt.
If a client has redrawn on their investment loan for personal use at any point, their deductible interest needs to be apportioned. This is frequently miscalculated ( and the ATO knows it).
The portion of interest attributable to the private redraw is not deductible. The calculation needs to be done correctly and documented, and many clients have been getting it wrong.
What advisors should be asking:
- Has the client redrawn on their investment loan in the last financial year?
- If yes, was any part of that redraw for private use?
- Is the loan structure still appropriate, split facilities, offset accounts, interest-only periods?
- Are the client’s records clean enough to support the interest claims in the event of a review?
EOFY is also the natural moment to review whether the client’s loan structure is still working for them. Interest rates have moved materially over the last two years. A loan structure that made sense at 2.5% looks different at 6.5%.
LAND TAX: UNDERSTAND WHAT YOU’RE CARRYING BEFORE IT COMPOUNDS
Land tax is one of the most misunderstood ongoing costs in property investment. It’s state-based, assessed annually and calculated on the aggregate value of all properties held in that state. Investors who own multiple properties in the same jurisdiction are frequently surprised, not by the rate, but by how quickly their combined land value has crossed the threshold.
The reason this tends to catch people off guard is timing. Property values have moved significantly over the last five years. A portfolio that sat comfortably below the threshold in 2021 may have crossed it without the owner realising. The first sign is often an unexpected bill.
The EOFY action here is straightforward: review land holdings by state, calculate the combined land value in each jurisdiction and confirm whether the client is above or approaching the threshold. First-time investment property owners are often unaware they are required to self-assess and lodge a land tax return; the liability doesn’t wait for a reminder letter.
For clients considering a second investment property, this conversation opens a particularly valuable door.
Buying in a different state resets the land tax threshold entirely. A client whose first investment property is in Queensland, with a land value of $440,000, faces zero Queensland land tax. If their second property is in South Australia (where the threshold sits at approximately $833,000), that property also sits comfortably under its own state threshold. Two properties. Two independent thresholds. Potentially zero land tax on either.
As values grow, this structural advantage compounds. We’ve written about this in detail in our earlier blog, The Strategy Smart Property Investors Use to Keep Their Returns. Worth revisiting with clients who are building a multi-property portfolio.
NEW PURCHASES: TIMING MATTERS MORE THAN MOST CLIENTS REALISE
For clients who are considering a house and land package or their next investment property, EOFY is a natural trigger for the conversation, not because the tax tail should wag the investment dog, but because understanding the tax position from the outset leads to better decisions.
Three timing considerations worth knowing:
The depreciation clock starts at construction completion
For a house and land package, Division 43 depreciation begins when the build is complete, not when the land contract is signed. A client who settles on a block in April and completes construction in November doesn’t start claiming capital works deductions until the following financial year. Understanding this helps them model cashflow and tax outcomes accurately across the first two to three years of ownership.
New builds carry significantly better depreciation entitlements than established properties
For clients comparing a new house and land package against an established property, the difference in annual depreciation deductions can be substantial. A new build purchased after 9 May 2017 carries full Division 40 and Division 43 entitlements (typically $10,000 to $18,000 in year one). An established property purchased after the same date only allows Division 40 depreciation on genuinely new assets installed post-purchase. The annual difference can represent $5,000 to $10,000 in foregone deductions – every year.
Timing the purchase relative to EOFY affects the first year’s deductible expenses
Costs associated with purchasing an investment property; stamp duty, legal fees, loan establishment costs, are generally not immediately deductible but form part of the cost base for future capital gains tax purposes. However, borrowing costs can be claimed over five years from the date of the loan. Understanding which year those deductions begin is part of a well-structured purchase conversation.
| New house & land package | Established property (post-May 2017) | |
| Div 43 — capital works | Full — 2.5% pa from completion | Full — if building post-1987 |
| Div 40 — plant & equipment | Full — all new assets | New assets only — not existing at purchase |
| Year one deduction est. | $10,000–$18,000+ | $2,000–$5,000 (limited Div 40 only) |
| Annual deduction advantage | — | Up to $10,000+ less per year |
SAVE TAX AND SET UP THE NEXT 12 TO 24 MONTHS
The investors who consistently outperform aren’t the ones who find the cheapest properties or time the market perfectly. They’re the ones who treat their portfolio like a business, reviewing it regularly, using every legitimate lever available to them, and making decisions based on a clear picture of where they are and where they’re headed.
EOFY is one of the few moments in the year when that kind of review happens naturally. The tax deadline creates urgency. The urgency creates attention. And the attention is an opportunity: for the investor, and for the advisor who shows up with a framework rather than a form.
At ALC, we supply house and land packages across South East Queensland, Victoria and South Australia; selected for depreciation profile, rental yield and state diversification. For clients who are considering their next property as part of a broader EOFY and wealth strategy, we’re always open to having that conversation early. Reach out to the ALC team.
