Investment Property Tax Deductions in Victoria
Last updated: 2026 · Financial year 2025-26
A comprehensive guide to every tax deduction available to VIC property investors, including VIC-specific land tax rules, depreciation claims, and ATO record-keeping requirements.
Common Deductions for VIC Investors
These deductions are available to all Australian property investors under ATO rules, regardless of which state or territory the property is located in.
Loan interest
Interest on your investment property loan is your single largest deduction. This includes interest on the original purchase loan and any loans for capital improvements.
Property management fees
Fees paid to a property manager for tenant sourcing, rent collection, inspections, and ongoing management.
Council rates
Local council rates are fully deductible for investment properties in the financial year they are paid.
Water rates and charges
Water supply charges and usage (where the landlord pays) are deductible.
Insurance premiums
Landlord insurance, building insurance, and contents insurance for the rental property.
Repairs and maintenance
Costs to repair or maintain the property in its current condition (not improvements). Includes plumbing, electrical, painting, and pest control.
Body corporate / strata fees
Quarterly strata levies for apartments and townhouses, including special levies for repairs (but not capital improvements to common property).
Land tax
Annual state land tax is fully deductible against your rental income in the year it is paid.
Advertising for tenants
Costs of advertising the property for rent, including online listings and signage.
Legal expenses
Legal costs related to tenant disputes, lease preparation, and eviction proceedings.
Travel to property (limited)
Travel costs to inspect the property, collect rent, or carry out maintenance. Note: the ATO scrutinises travel deductions closely since 2017 changes.
Depreciation — Division 40 (plant & equipment)
Deductions for the decline in value of removable assets like carpets, blinds, hot water systems, air conditioners, and appliances.
Depreciation — Division 43 (capital works)
Deductions for the building structure itself. Residential buildings constructed after 15 September 1987 qualify for a 2.5% annual deduction on construction costs.
Tax agent and quantity surveyor fees
The cost of preparing your tax return (the investment property portion) and obtaining a depreciation schedule from a quantity surveyor.
VIC-Specific Considerations
Key rules and factors that apply specifically to investment properties in Victoria. Managed by State Revenue Office Victoria.
Victoria slashed its land tax threshold from $300,000 to $50,000 in 2024, dramatically increasing the tax burden on property investors. This is now the lowest threshold in Australia.
The Vacant Residential Land Tax (VRLT) applies to properties in metropolitan Melbourne left vacant for more than 6 months in a calendar year. The tax is 1% of the capital improved value.
From 2025, the VRLT is expanding to cover all of Victoria, not just metro Melbourne.
Victoria has a COVID debt levy adding an additional 0.1% to land tax for holdings between $300,000 and $600,000, and 0.15% above $600,000. This is temporary but has been extended.
Windfall gains tax: Rezoning that increases land value by more than $100,000 may trigger a windfall gains tax of up to 50%.
Land Tax in Victoria
Rate
Starts at $275, scaling to 2.25% above $3 million
Rate Brackets
- •Tax-free threshold of $50,000 — the lowest in Australia (reduced from $300,000 in 2024)
- •$50,001 to $100,000: $275 + 0.06% of amount over $50,000
- •$100,001 to $300,000: $275 + rates scaling from 0.1%
- •$300,001 to $600,000: 0.3% rate bracket
- •$600,001 to $1,000,000: 0.6% rate bracket
- •$1,000,001 to $1,800,000: 0.9% rate bracket
- •$1,800,001 to $3,000,000: 1.75% rate bracket
- •Above $3,000,000: 2.25%
- •Assessed on total landholdings as at 31 December
Foreign owner surcharge: 4% absentee owner surcharge applies to foreign owners and owners living outside Australia
Land tax is fully deductible against your rental income for investment properties. Use our Land Tax Calculator to calculate your exact land tax across all states.
Stamp Duty in Victoria
Victoria charges land transfer duty on property purchases. Investment properties pay the full rate with no concessions.
- •Up to $25,000: 1.4%
- •$25,001 to $130,000: $350 + 2.4% of excess
- •$130,001 to $960,000: $2,870 + 6% of excess
- •Over $960,000: 5.5% flat rate
- •Additional 8% surcharge for foreign purchasers
- •Premium duty of 6.5% applies to properties over $2 million
- •No first home buyer concessions for investment properties
Stamp duty is not an annual deduction but forms part of your CGT cost base. Use our Stamp Duty Calculator to estimate your upfront costs.
Depreciation Claims
Depreciation is one of the most powerful (and often overlooked) deductions for property investors. It allows you to claim the decline in value of the building and its fittings without spending any additional money.
Covers the building structure itself — walls, roof, floors, fixed cupboards, doors, and windows.
- 2.5% per year of original construction cost
- Applies to buildings constructed after 15 September 1987
- Claimed over 40 years
- Must have a quantity surveyor's report
Covers removable assets and fittings — items that are not permanently fixed to the structure.
- Carpets, blinds, curtains (typical life: 8-10 years)
- Hot water systems, air conditioners (10-20 years)
- Ovens, cooktops, dishwashers (12-15 years)
- Available regardless of building age
Important for VIC investors: Since March 2017, Division 40 deductions for previously used plant and equipment in second-hand residential properties are no longer available to the new owner. You can only claim Division 40 on items you purchase and install yourself. Division 43 capital works deductions are unaffected by this change.
Estimate your depreciation claims with our Depreciation Estimator.
Record Keeping Requirements
The ATO requires all property investors to maintain accurate records to substantiate deduction claims. Failure to keep adequate records can result in disallowed deductions and penalties.
Retention period
Keep records for at least 5 years from the date you lodge your tax return. For CGT purposes, keep records for the entire period of ownership plus 5 years after disposal.
Rental income
Bank statements, rental ledgers, and property management statements showing all rental income received.
Expenses
Receipts, invoices, and bank statements for all deductible expenses including repairs, insurance, management fees, and council rates.
Loan records
Annual loan statements showing interest charged. If the loan was refinanced or redraw used for personal purposes, keep records to show the investment portion.
Depreciation
A tax depreciation schedule prepared by a qualified quantity surveyor, plus receipts for any new plant and equipment you install.
Capital improvements
Receipts for renovations, additions, and improvements (not repairs). These are not immediately deductible but form part of your CGT cost base.
VIC-specific records
Keep your State Revenue Office Victoria land tax assessments, stamp duty receipts, and any state-specific levy notices (e.g., emergency services levies, water authority charges).
Frequently Asked Questions
Victoria reduced its general land tax threshold from $300,000 to $50,000 in 2024 as part of measures to address the state's COVID-19 debt. This means most investment property owners in Victoria now pay land tax, even those with relatively modest land values.
The VRLT is a 1% annual tax on the capital improved value (CIV) of residential properties left vacant for more than 6 months in a calendar year. It originally applied to metro Melbourne but is expanding to all of Victoria from 2025. If your investment property is tenanted or genuinely available for rent, it does not apply.
Yes. The COVID debt levy is part of your land tax assessment and, like all land tax, is fully deductible against your rental income for investment properties.
The same federal depreciation rules apply in all states. Division 43 capital works deductions (2.5% per year) apply to buildings constructed after 15 September 1987. Division 40 plant and equipment deductions are available for items like carpets, hot water systems, and air conditioners. Get a quantity surveyor's report to maximise your claims.
It depends on your portfolio and situation. Victoria's lower land tax threshold increases holding costs, but Melbourne's strong rental yields, population growth, and capital growth potential can offset the additional tax. Run the numbers carefully — our land tax calculator can help compare states.
Track Your VIC Property Deductions Automatically
PropBoss automatically categorises your rental income, expenses, depreciation, and tax deductions for your Victoria investment properties — no spreadsheets, no missed claims.
Related Calculators
Related State Guides
This guide is for general information only and does not constitute financial or tax advice. Tax laws change frequently — thresholds and rates shown are for the 2025-26 financial year. Always consult a qualified tax professional or registered tax agent for advice specific to your situation. Last reviewed 2026.