Property investment is one of Australia’s favourite wealth-building strategies — but owning investment property without the right tax advice is like running a business without looking at the numbers. The difference between a property investor who understands their tax position and one who doesn’t isn’t a rounding error — it can be tens of thousands of dollars per year, and hundreds of thousands over a full investment cycle. In this post, I’ll walk you through the key tax considerations for Australian property investors and how to structure your portfolio for long-term wealth.
Why Property Investors Need a Specialist
Property investment sits at the intersection of income tax, CGT, land tax, GST (in some cases), and state-based regulations. Most general accountants can handle the basics — declaring rental income and claiming basic deductions — but very few have the depth to advise on optimal structure for holding multiple properties, CGT minimisation on eventual disposal, and depreciation optimisation through quantity surveyor reports.
Negative Gearing Explained
Negative gearing occurs when the expenses of holding an investment property exceed the rental income — creating a net loss. This loss is deductible against your other income (salary, business income, etc.), reducing your overall tax bill.
For example: you earn $200,000 from your business and have a rental property that generates $30,000 in rent but costs $45,000 to hold. The $15,000 net loss is deductible against your $200,000 income — saving you approximately $7,050 in tax at the 47% rate.
Interest Deductions: What Qualifies?
- Only interest on funds borrowed to acquire or improve the investment property is deductible
- Mixed-purpose loans must be apportioned between investment and personal use
- Loan fees and establishment costs are deductible over the term of the loan (not immediately)
Depreciation Schedules and Quantity Surveyors
Depreciation is one of the most underutilised tax deductions available to property investors. You can claim:
- Division 43 (building allowance): 2.5% of the original construction cost per year for residential properties built after 17 July 1985
- Division 40 (plant and equipment): Fixtures and fittings — carpets, blinds, appliances, hot water systems, air conditioning
A depreciation schedule from a registered quantity surveyor (typically $500–$700) pays for itself many times over in the first year’s deductions.
Land Tax Across States
Land tax is a state-based tax with different rates and thresholds in each state. Land tax planning is essential as a portfolio grows — the structure in which you hold property affects land tax significantly.
Using a Trust to Hold Investment Property
Holding investment property in a family trust offers income splitting, the 50% CGT discount, and asset protection. However, negatively geared properties in a trust cannot offset losses against personal income — trust losses are trapped. The trust structure works best for positively geared or high-growth properties.
CGT on Sale of Investment Property
- If held for more than 12 months, the 50% general CGT discount applies
- Timing the sale to a year when your other income is lower reduces the effective tax rate
- Capital losses from other assets offset capital gains first
SMSF and Property
An SMSF can hold residential or commercial property with rental income taxed at only 15% in accumulation phase, and 0% in pension phase. This makes it an extraordinarily tax-effective vehicle for property investment — but the property cannot be used by members or related parties for personal purposes.
How Pinnacle Approaches This With Property Investors
Property investor clients at Pinnacle get a comprehensive review of their entire portfolio and tax position. We look at each property — its income, expenses, depreciation, and projected capital gain — and advise on the most tax-effective structure. Learn more about our tax planning approach here.
To discuss your property investment tax position, contact Pinnacle today for an obligation-no-obligation consultation.
Frequently Asked Questions
Is negative gearing still available in Australia?
Yes. As of 2026, negative gearing is fully available for Australian property investors. Current ATO rules allow rental losses to be offset against other assessable income.
Can I use my SMSF to buy a property I live in?
No. The superannuation laws prohibit an SMSF from acquiring residential property from, or leasing it to, a related party including fund members.
What is the main residence exemption?
The main residence exemption excludes capital gains on the sale of your main home from CGT. If you used part of your home for income-producing purposes, or rented it out while treating it as your main residence, the exemption is apportioned.
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One of the most valuable concessions for an investor who once lived in the property is the CGT 6 year rule, which can keep a former home exempt for up to six years of rental. If you hold business premises in your fund, see our guide to upgrading business premises held in super.