Investment Tax Deductions Australia: Shares, Property & Dividends (2025–26)

Investment Income and Deductions: The Basics

If you earn income from investments — shares, managed funds, or rental property — you can also claim the expenses you incur in earning that income. The key principle: the expense must have been incurred to produce assessable income.

Shares and Managed Funds

Dividends and Franking Credits

Australian companies pay tax at 30% (or 25% for base rate entities) before distributing dividends. The tax already paid becomes a franking credit that you can use to offset your personal tax liability.

How it works:

• You receive a $700 dividend with $300 franking credits attached
• Your gross dividend is $1,000 (the cash + franking credit)
• You include $1,000 in your income and claim the $300 franking credit as a tax offset
• If your tax rate is below 30%, you may receive a refund of the excess franking credit

This is why Australian shares are particularly tax-effective for lower-income earners.

Deductions for Share Investors

You can claim:

• Interest on investment loans (borrowings used to purchase shares)
• Margin loan interest (fully deductible if used to purchase income-producing investments)
• Investment advice fees that relate to managing existing investments (not for initial financial planning)
• Subscription fees for investment data services (e.g., stock screeners, research platforms)
• Safe custody fees and account-keeping fees charged by brokers

You cannot claim:

• Brokerage commissions (these are added to your cost base for CGT purposes)
• Costs related to getting tax-exempt income

Capital Gains and Losses

When you sell shares for more than you paid, you have a capital gain. When you sell for less, you have a capital loss.

Key rules:

• Capital losses can only offset capital gains, not other income
• Net capital losses carry forward to future years (they do not expire)
• Assets held for more than 12 months qualify for the 50% CGT discount (residents only)

Example:

• Buy 1,000 shares at $5.00 = $5,000 cost base (+ brokerage)
• Sell at $8.00 after 18 months = $8,000 proceeds
• Capital gain = $3,000; after 50% discount = $1,500 included in income

Rental Property Deductions

Rental property investors can claim a wide range of expenses:

Immediately Deductible (same year)

Depreciated Over Time

• Building depreciation (Division 43): 2.5%/year for residential buildings built after 16 September 1987
• Plant and equipment (Division 40): Carpet, blinds, hot water systems — depreciated over effective life

Important: For properties purchased after 7:30pm 9 May 2017, you can only claim depreciation on new plant and equipment you install yourself — not second-hand items.

Negative Gearing

If your rental expenses exceed your rental income, you have a rental loss. This loss can offset your other income (e.g., your salary), reducing your overall tax.

Example: $20,000 rent received, $28,000 in expenses (including loan interest) = $8,000 loss × your marginal rate in tax savings.

Interest on Investment Loans

Interest is one of the largest deductions for leveraged investors. Rules:

• Fully deductible if the loan purpose was to purchase income-producing investments
• Not deductible for the portion used to buy vacant land or assets not earning income
• Mixed-use loans (partly investment, partly personal): apportion the interest

Keep detailed records of loan purpose, especially if you redrew from your mortgage.

Common Mistakes for Investors

*This guide provides general information based on ATO guidelines for FY2025–26. Capital gains tax and investment deductions can be complex — consult a registered Tax Agent for your specific situation.*