Any income received from a residential rental property is liable for income tax and must be declared in your personal income tax return (IR3).

The financial year generally starts 1st of April and ends 31st March.

There are some expenses which are deductible and some non-deductible

The expenses you can deduct from your rental property income are:

• the cost of insuring your rental property

• the rates for the property

• payments to agents who collect rent, maintain your rental.

• fees paid to an accountant for managing accounts, preparing tax returns and advice.

• repair and maintenance costs

• fees for arranging a mortgage to finance the rental property.

• fees for drawing up a tenancy agreement.

• the cost of getting a valuation required to get a mortgage, but not insurance valuations.

• the costs of taking legal action to recover unpaid rent.

• the costs for evicting a tenant.

• travel expenses for travelling to inspect your property or to do repairs.

• legal fees involved in buying a rental property, if the expense is $10,000 or less.

Expenses you cannot deduct from your rental income are:

• capital expenses.

• the purchase price of a rental property

• costs of making any additions or improvements to the property

• cost of repairing or replacing damaged property, if the work increases property value.

• real estate agent fees charged as part of buying or selling the property.

• your time when you do repairs and maintenance work.

• legal fees involved with selling the rental property (unless you’re in the business of providing residential rental accommodation).

The difference between repairs and improvements can be complex and it is best to get tax advice.

Timeframes for the interest limitation rules

From 1 April 2025 you can claim 100% of the interest you incur.

1 April 2024 to 31 March 2025

You can claim 80% of the interest you incurred. It does not matter when you got the property or drew down the loan.