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Record-keeping for rental properties

Rental properties are a paperwork game. If the records are clean, the tax return is straightforward and defensible. If the records are messy, you risk missing deductions, claiming the wrong thing, or spending hours reconstructing the year.

Why record-keeping matters

Good records are not just about “getting a bigger refund” — they protect you and reduce stress.

Claim what you’re entitled to

Clear evidence makes it easier to claim legitimate deductions and avoid missing items (interest, agent fees, insurance, rates, repairs, etc.).

Reduce ATO risk

If the ATO asks questions, you need to support the claim with invoices and statements. “I think it was about…” is not a defence.

Better decisions

Good records help you understand the real performance of the property (cashflow, vacancy impact, repair patterns, and interest sensitivity).

Tell it like it is: most rental tax issues are not complex tax law — they’re missing documents and mixed-up loans.

What you should keep (the practical list)

If you can produce these quickly, you’re in a strong compliance position.

Income

  • Property manager annual statement (or rent ledger) showing rent received and fees.
  • Bank statements if you self-manage.
  • Evidence of any insurance recoveries, compensation, or rent guarantees (if applicable).

Expenses

  • Loan statements showing interest and any loan fees.
  • Council rates, water rates, strata/body corporate levies.
  • Insurance policies and premium invoices.
  • Repairs and maintenance invoices (with clear descriptions).
  • Landlord expenses: advertising, tenant checks, property management fees, accounting fees (if relevant).

Tip: for repairs, keep invoices that clearly describe the work. Vague invoices make it harder to classify correctly.

Capital works and depreciation (don’t ignore these)
If you renovate, replace key items, or buy a newer property, a depreciation schedule can support deductions over time. Keep renovation invoices, dates, and details so the schedule can be updated properly.

Loans with private and investment use (this is the big one)

Mixed-purpose loans are where many people accidentally overclaim (or underclaim) interest.
Interest is generally deductible to the extent the borrowing is used to earn rental income. If a loan is used for both rental and private spending, the interest needs to be split. Mixing the two makes the maths messy and creates unnecessary audit risk.

Common ways loans become “mixed”

  • Redraw used for private spending (holidays, cars, school fees, personal bills).
  • Refinance top-up where the extra funds are not used for the rental.
  • One loan used for multiple properties and personal costs over time.
  • Debt recycling strategies executed without clean sub-accounts (creates apportionment issues).

Best practice: split early, keep it clean

  • Use separate loan splits (or separate loans) for separate purposes.
  • If you need funds for private use, do that in a separate split — do not redraw from the investment portion.
  • Keep an offset account separate from redraw where possible (offset generally doesn’t “taint” the loan purpose, while redraw can).
  • Keep a one-page “loan purpose log” showing each drawdown and what it funded.
Redraw vs offset (why it matters)
A practical rule: redraw changes the loan balance and can create mixed purpose if the redraw is used privately. An offset is a separate account that reduces interest while your money sits there. They are not the same thing. If you are planning to use funds for private spending, get advice before you move money around.
If you mix private and investment use in one loan and don’t keep a clear trail, the interest calculation becomes a reconstruction exercise. That usually costs you more in accounting fees than it ever saved you.

Common pitfalls (and how to avoid them)

These are the issues that cause amendments, missed deductions, and needless back-and-forth.

Pitfalls we see often

  • Loan interest doesn’t reconcile because the loan was redrawn for private use.
  • “Repairs” claimed that are actually improvements (and should be capitalised).
  • Missing invoices (especially for one-off big expenses).
  • Claiming expenses during vacancy periods where the property wasn’t genuinely available for rent.
  • Not tracking special levies and strata notices properly (classification matters).

What to do instead

  • Keep loan splits clean and document any top-ups.
  • Save all invoices as you go (a single folder is fine).
  • Track key dates: purchase, first tenant, vacancy periods, renovations.
  • Flag large works for review so they’re treated correctly.
  • Keep annual property manager statements and loan summaries ready at tax time.

Best-practice checklists

A simple system that works for most landlords — even if you’re busy.

Set-up (once)

Monthly (10-minute routine)

If you do nothing else: keep loan purpose clean and keep invoices. That alone prevents most problems.

Case studies (good and bad)

Same type of investor. Very different outcomes depending on loan hygiene and records.
Best practiceGood case study: “Separate splits, simple tax time”

A landlord refinances and sets up two loan splits: one strictly for the rental property and one for a private renovation at home. They use an offset account for savings and never redraw from the investment split for private spending.

At tax time, the interest is clean and defensible. The rental deductions are straightforward, and there’s no need for apportionment calculations.

Outcome: correct claims, lower risk, and lower accounting time and cost.

Avoid thisBad case study: “One loan for everything”

A landlord has one large loan, repeatedly redraws for private spending, and also pays for rental repairs from the same redraw facility. They have no clear log of what each drawdown was used for.

The interest deduction becomes a reconstruction exercise, often requiring apportionment and assumptions. This is time-consuming and can increase ATO risk if the records can’t support the method.

Outcome: higher fees, stress, and a higher chance of an incorrect interest claim.

Official Australian resources

If you want the source guidance, these are good starting points.

General information only. This page is not legal or financial advice and does not consider your specific circumstances.

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