7 tax strategies for property investors ahead of the EOFY

Discover smart tax strategies for Australian property investors before EOFY 2025. Maximise deductions, navigate ATO changes, and optimise your investment returns.

Did you know the average Australian property investor leaves $9,000 in potential tax deductions unclaimed each year? With the end of financial year fast approaching and significant changes to Australia’s tax landscape in 2025, there’s never been a more critical time to optimise your property investment tax strategy.

Recent ATO statistics reveal that property investors claimed $10.9 billion in negative gearing deductions during 2023-24. Yet many investors miss out on legitimate deductions simply because they don’t understand what’s available or how to claim them properly. Meanwhile, the tax office has ramped up its data matching capabilities, making compliance more important than ever.

Whether you’re a first-time property investor or managing a substantial portfolio, this guide will show you exactly how to maximise your tax benefits while staying on the right side of the ATO. From simple record-keeping strategies through to advanced depreciation scheduling, we’ll cover everything you need to know to make the most of your investment before 30 June.

What’s changed in the 2025 tax landscape

The Australian property investment tax environment has undergone substantial changes in 2025, and understanding these shifts is crucial for your strategy.

Tax rate relief across the board

From 1 July 2024, tax rates dropped from 19% to 16% for 13.6 million Australians. While this provides welcome relief, it also means the tax benefits from negative gearing may be slightly reduced for some investors. If you’re in this bracket, you’ll want to focus even more on maximising other deductions.

Foreign investment rules got tougher

The Foreign Resident Capital Gains Withholding rules changed dramatically from January 2025. The withholding rate jumped to 15%, and the previous $750,000 property price threshold disappeared entirely.

Here’s what this means for you: even if you’re an Australian resident, you now need an ATO Clearance Certificate to avoid withholding tax on property sales. Don’t get caught off guard – processing delays mean you should apply well before settlement.

Enhanced ATO data matching capabilities

The ATO’s data matching capabilities have become incredibly sophisticated. Your property transactions, rental income, and expense claims are now cross-referenced with bank records, real estate agent reports, and state government databases in real-time.

What does this mean? Every deduction you claim needs proper documentation. The days of rough estimates are well and truly over.

Super changes for high-value investors

If your super balance is approaching $3 million, pay attention. New Division 296 rules from July 2025 will tax unrealised gains in super funds above this threshold. This could significantly impact SMSF property investment strategies.

Record keeping that actually works and saves you money

Let’s be honest – most property investors’ record keeping is a mess. Shoeboxes full of faded receipts, missing loan statements, and that sinking feeling every tax time when you realise you can’t prove half your expenses.

Here’s how to fix it once and for all.

Go digital from day one

Ditch the paper filing system. Cloud-based apps let you photograph receipts instantly, automatically categorise expenses, and sync with your accountant’s software. Many investors using digital systems find they identify 20-30% more deductions simply because everything’s organised and accessible.

The five-year rule

The ATO requires you to keep property records for five years after disposal. But smart investors maintain comprehensive records throughout ownership. Why? Because when you sell, every dollar you can add to your cost base reduces capital gains tax.

What records matter most

Your property investment generates three types of expenses:

• Acquisition costs: Purchase contracts, stamp duty, legal fees, building inspections
• Ongoing ownership: Loan interest, insurance, rates, repairs, property management fees
• Disposal costs: Marketing, legal fees, agent commissions

The repair vs improvement trap

This distinction catches many investors out. Repairs restore your property to its original condition and are immediately deductible. Improvements enhance the property beyond its original state and are added to your cost base for CGT purposes.

Examples that trip people up:

• Fixing a broken tap = repair (deductible now)
• Installing a new kitchen = improvement (CGT cost base)
• Replacing old carpet with identical carpet = repair
• Upgrading to premium flooring = improvement

Professional management equals simplified records

If you use a property manager, they’ll typically provide annual summaries of income and expenses. Just make sure you still track what you pay directly – loan interest, insurance premiums, and any capital improvements.

Unlock thousands with professional depreciation schedules

Here’s a question that might surprise you: when did you last think about your hot water system’s tax value?

If you’re like most investors, the answer is never. Yet that hot water system, along with your dishwasher, carpet, blinds, and even light fittings, could be generating hundreds or thousands in annual tax deductions.

Two types of depreciation explained

Property depreciation splits into two categories:

Capital works (the building structure) This covers walls, roofs, floors, and built-in fixtures. If your property’s construction began after 15 September 1987, you can claim 2.5% annually for up to 40 years.

Example: A $400,000 construction cost means $10,000 in annual capital works deductions for 40 years.

Plant and equipment (the removable stuff) Everything that’s not nailed down – appliances, carpet, blinds, even door handles. Each item has an ATO-determined effective life, and you can depreciate accordingly.

Why professional schedules pay for themselves

Leading quantity surveyors guarantee to find double their fee in first-year deductions or provide their service free. They identify depreciating assets most people miss:

• Smoke detectors and security systems
• Hot water systems and ducted heating
• Built-in wardrobes and kitchen cupboards
• Landscaping and exterior lighting
• Floor coverings and window treatments

New vs established properties

New properties offer maximum depreciation opportunities since all items are at full value. But don’t write off established properties – any renovations or improvements create fresh depreciation opportunities.

Choosing your calculation method

You have two options:

• Prime cost method: Even annual deductions, great for long-term planning
• Diminishing value method: Higher deductions in early years, lower amounts later

Most investors choose diminishing value for better cash flow in the early years of ownership.

Every deduction you can legally claim

Are you claiming everything you’re entitled to? Most investors leave money on the table simply because they don’t know what’s deductible.

Beyond the obvious

Everyone knows about loan interest and property management fees. But what about:

• Advertising costs: Online listings, signage, photography for rental ads
• Insurance premiums: Landlord, building, and contents insurance
• Council rates and charges: Unless your tenant pays them directly
• Body corporate fees: Common area maintenance and administration
• Professional services: Accounting, legal advice, quantity surveyor fees
• Bank charges: Loan establishment fees, redraw costs, ongoing account fees

The prepaid expense strategy

Here’s a cash flow hack many investors miss: you can prepay up to 12 months of eligible expenses before EOFY for immediate deductions.

Examples that work:

• Annual insurance premiums paid in June
• Loan interest paid in advance
• Maintenance contracts for the coming year

This strategy provides immediate tax relief while helping with cash flow management throughout the year.

Travel deduction reality check

Since 2019, individual property investors can’t claim travel expenses for property inspections or maintenance. This includes flights, accommodation, and car expenses. The exception? If you operate through a company structure, some travel costs may still be deductible.

Mixed-use property rules

If you use your investment property personally (like a holiday home), you must apportion all expenses based on rental versus personal use. The ATO scrutinises these claims closely, so detailed records of usage are vital.

PAYG instalments and managing cash flow like a pro

Think PAYG instalments are just another bureaucratic headache? Think again. Properly managed, they can actually improve your cash flow and help you avoid nasty year-end tax surprises.

When you’re required to join

The ATO automatically includes you if you have:

• Instalment income of at least $4,000, AND
• Tax payable of $1,000 or more from your latest assessment

Most property investors with multiple properties or significant rental income will meet these thresholds.

Two ways to calculate your payments

Option 1: Instalment rate method Apply an ATO-determined percentage to your quarterly rental income. This adjusts automatically as your income changes.

Option 2: Instalment amount method Make fixed quarterly payments based on last year’s tax liability, adjusted for expected growth.

The voluntary entry advantage

You can choose to enter PAYG instalments even if not required. Why would you want to?

Take Sarah, a teacher with two investment properties. She expects to owe $8,000 in tax this year. Instead of facing this bill in October, she can spread it across four quarterly payments of $2,000. Much easier to manage, and it forces better budgeting habits.

PAYG variations for changing circumstances

If circumstances change – major repairs, extended vacancy, or reduced rental income – you can apply to vary your instalments. Just be careful not to under-pay substantially, as interest charges may apply.

Capital gains tax and planning your exit strategy

Most property investors focus on buying and holding, but smart investors plan their exit strategy from day one. Why? Because CGT planning can save you tens of thousands when you eventually sell.

The 50% discount rule

Hold your property for more than 12 months as an Australian resident, and you’ll only pay tax on half your capital gain. This single rule makes long-term investing incredibly tax-effective.

Building your cost base

Your property’s cost base determines how much CGT you’ll pay. It includes:

• Original purchase price
• Stamp duty and legal fees
• Building inspections and surveys
• Capital improvements during ownership

Example: You bought for $500,000, paid $25,000 in stamp duty and legal fees, then spent $50,000 on renovations. Your cost base is $575,000. If you sell for $750,000, your capital gain is $175,000, not $250,000.

The depreciation catch

Here’s where it gets tricky. Capital works depreciation you’ve claimed reduces your cost base, potentially increasing your CGT liability. However, the annual tax savings usually far outweigh this eventual cost.

Timing your sale

Strategic timing can optimise your tax outcome:

• Sell in a lower income year to reduce your marginal tax rate
• If approaching retirement, defer the sale until pension eligibility
• For multiple properties, spread sales across different financial years

The $3 million super question

If your super balance is approaching $3 million, the new Division 296 rules from July 2025 will tax unrealised gains annually. SMSF property investors need to factor this into their disposal timing decisions.

Staying ahead of enhanced ATO oversight

The ATO’s compliance game has changed dramatically. Their data matching capabilities now cross-reference your tax return against dozens of external sources in real-time.

What triggers an audit

Common red flags include:

• Claiming expenses without proper documentation
• Significant year-on-year variations in income or expenses
• Properties not genuinely available for rent
• Excessive repair claims compared to property value
• Travel expense claims (remember, these are generally not allowed)

The professional advantage

Registered tax agents understand current legislation and can identify legitimate optimisation opportunities while keeping you compliant. They also provide protection if ATO queries arise.

The cost of professional advice often proves insignificant compared to the value of avoided penalties and optimised tax outcomes. Plus, their fees are tax-deductible!

Future-proofing your strategy

While negative gearing changes have been ruled out for 2025, political discussions continue. Smart investors maintain flexible strategies and stay informed about potential policy developments.

Key principles that survive political changes:

• Maintain meticulous records
• Claim only legitimate deductions
• Seek professional advice for complex situations
• Plan for the long term while optimising annually

Your EOFY action plan

Time is running out to implement these strategies for the current financial year. Here’s your priority checklist:

Before 30 June 2025

• Review and categorise all property-related expenses for the year
• Prepay eligible expenses for immediate deductions
• Complete any planned maintenance or repairs
• Obtain professional depreciation schedules for new acquisitions
• Ensure all loan interest and professional fees are up to date

Immediate actions

• Implement a digital record-keeping system for next year
• Schedule a consultation with a property tax specialist
• Review your PAYG instalment arrangements if applicable
• Plan any capital improvements for the new financial year

Long-term strategy

• Develop a comprehensive property portfolio tax plan
• Review ownership structures for tax efficiency
• Plan disposal timing for optimal CGT outcomes

The complexity of property investment taxation, combined with enhanced ATO scrutiny and evolving regulations, makes professional guidance more valuable than ever. The investment in proper tax planning typically provides returns many times greater than the advisory costs.

Australian property investment offers exceptional wealth-building opportunities when combined with effective tax management. By implementing these strategies before EOFY and maintaining professional standards throughout your investment journey, you’ll maximise returns while ensuring full compliance with Australian taxation requirements.

Further questions

This is general information only and is subject to change at any given time. Your complete financial situation will need to be assessed before acceptance of any proposal or product.