How Rental Income & Tax Benefits Can Boost Your Cash Flow in 2025

Whether you're based in Sydney, Bathurst, or anywhere across NSW or Australia, property investment remains one of the most effective ways to grow long-term wealth. With the right strategy, it can also boost your cash flow today — through a combination of rental income and tax benefits.

In this article, you’ll learn:

• How rental income offsets your investment loan repayments

• What investment property expenses are tax-deductible in Australia

• How property depreciation works (and how to claim it)

• Cash flow examples for investors in different financial positions

• Answers to common tax questions for Australian investors

Rental income is a key part of maximising your investment property’s return — offsetting loan repayments and creating additional cash flow. Learn how rental yield and property depreciation can improve your tax outcomes in Australia.

🏡 Can an Investment Property Reduce the Tax you pay in Australia?

Yes. When structured correctly, an investment property can significantly reduce your taxable income, especially for salaried professionals and families in cities like Sydney or Bathurst. This happens through rental income offsetting expenses, and deductions for eligible costs.

If your expenses exceed rental income, the property is negatively geared — and you can usually claim that loss against your other income.

👉 Read more about this from the ATO: Rental Property Guide 2025

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💼 What Investment Property Expenses Are Tax-Deductible?

Here’s a breakdown of tax-deductible expenses for investment properties in Australia:

Tax-Deductible Expense	Description
Interest on your loan	Claimable if the loan is used for investment purposes to derive an income
Council & water rates	Deductible as part of ongoing holding costs
Property management fees	Includes letting fees and admin by rental agents
Insurance premiums	Landlord insurance for loss of rent or damage is deductible
Maintenance and repairs	Immediate deductions for non-capital repairs like plumbing or patching
Strata levies	If you're investing in a unit or townhouse, these are claimable
Advertising for tenants	Any expense to market the property for lease
Depreciation	Covers building structure and fittings — see below

Real clients, real results. At My Finance Agent, we work closely with you to structure your property investment strategy — from boosting borrowing power to maximising tax deductions and navigating rental income opportunities.

🏗️ How Is an Investment Property Depreciated?

Depreciation is one of the most valuable non-cash tax deductions available to property investors. You claim the loss in value of your property and its fixtures over time — lowering your taxable income without spending a cent out of pocket.

There are two key types of depreciation:

1. Capital Works Deduction (Division 43)

• Applies to buildings built after 1987

• Claimed at 2.5% annually over 40 years

• Includes walls, bricks, concrete, and built-in structures

2. Plant & Equipment Depreciation (Division 40)

• Covers items like:

• Ovens

• Carpet and flooring

• Hot water systems

• Blinds and air conditioning

• Claimed at varying rates based on item lifespan

📌 To access this, you’ll need a Tax Depreciation Schedule from a quantity surveyor. There is a difference on how a newly built property is compared to an established property.

👉 Want help? Contact us for a referral to our trusted surveyors or investment property accountants in NSW.

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💰 How Rental Income Offsets Your Loan Repayments

Unlike your home loan — where 100% of the repayments come from your salary — investment properties are income-producing assets. Your tenant helps pay down the loan for you.

🔢 Example 1: You’re a renter in Sydney and purchase an investment property (rentvestor)

• Your Rent: $500 per week

• Investment loan repayments: $2,500/month

• Rental income: $2,000/month

• Tax deductions: $300–$400/month

• Cost to hold the investment property: $100–$200/month

• Real out-of-pocket cost is $550 per week

🔢 Example 2: You live in Bathurst and own your home outright

• Use equity to purchase investment

• Rental income: $2,400/month

• Repayments: $1,800/month

• Net monthly cash flow: +$600/month

• Tax refund = bonus at year-end

Greg Robinson, one of our experienced mortgage brokers at My Finance Agent (on the left) celebrating another client’s successful investment property purchase — a big step toward leveraging rental income and tax benefits for long-term wealth.

❓ FAQ: Investment Property & Tax

Q: Can an investment property reduce tax in NSW or Australia-wide?

Yes. Through negative gearing, depreciation, and deductible expenses, most property investors can reduce their overall tax payable — especially those with stable PAYG income.

Q: How is an investment property depreciated in Australia?

Through capital works (the building) and plant & equipment (fixtures). You’ll need to purchase a depreciation schedule, which outlines how much can be claimed each year. There is a difference between newly built and existing properties.

Q: Can I claim expenses if my property is vacant?

Yes, in most cases — if it’s genuinely available for rent. An accountant can help clarify this.

👉 Get in touch to request a referral to a property-focused accountant in NSW.

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👥 Let’s Tailor This to Your Situation

We work with clients every day to structure smart, tax-effective investment property loans. We’ll help you:

• Understand your borrowing power and potential returns

• Connect with accountants and quantity surveyors

• Choose the right loan structure to balance cash flow and tax efficiency

Call us on (02) 8313-8400 or request a call back.