Disclaimer: This article contains general information only and has been prepared without taking into account your objectives, financial situation or needs. Tax outcomes vary by individual circumstance. Seek advice from a registered tax agent before acting on this content.
Legislative note: The negative gearing changes announced in the 2026-27 Federal Budget on 12 May 2026 had not received royal assent at the time this article was compiled (5 October 2026). Readers should seek advice from a registered tax agent before making decisions based on the announced changes.
If you earn $135,000 or more as a FIFO worker, every dollar you spend on rental property expenses saves you between 39 and 47 cents in tax. That puts you in a better position than most Australian property investors, but only if you understand what you can claim and what the ATO now prohibits.
On 12 May 2026, the Federal Government announced changes to negative gearing. Established residential properties purchased after 7:30pm on that date will lose access to negative gearing from 1 July 2027, assuming the legislation receives royal assent. Properties purchased before that cutoff are grandfathered. New builds retain negative gearing regardless of purchase date. If you bought before May, your position is protected. If you are considering a purchase now, the type of property you choose has a direct impact on your tax position for the life of the loan.
What You Can Claim Under TR 2026/1
You can claim an immediate deduction under section 8-1 of the Income Tax Assessment Act 1997 for expenses incurred in producing rental income. Taxation Ruling TR 2026/1, finalised by the ATO on 20 May 2026, governs what is and is not deductible for individual investors.
Loan interest is deductible to the extent the borrowed funds are used to acquire or improve an income-producing property. Property management fees, council rates, landlord insurance, body corporate fees, water charges, repairs and maintenance, advertising for tenants, and tax agent fees related to your rental return are all immediately deductible under section 8-1. Home Loans for FIFO Workers are structured to maximise the deductible portion where appropriate.
Repairs are immediately deductible. Improvements are not. Taxation Ruling TR 97/23 sets out the distinction. A repair restores a worn or broken asset to its previous condition. An improvement upgrades or replaces something with a superior or different item. Initial repairs are a trap for new investors. If you purchase a property with pre-existing damage or defects and then fix them, that work is treated as capital expenditure, not an immediately deductible repair. The ATO treats initial repairs as part of the cost of acquiring the property in a usable condition. This is an active compliance focus area.
Travel to inspect, maintain or collect rent from a residential rental property has been non-deductible for individual investors since 1 July 2017 under section 26-31 of the Income Tax Assessment Act 1997. You cannot claim flights, accommodation or vehicle expenses to visit your investment property, regardless of the reason for the trip. This restriction applies to all individual investors, including FIFO workers managing properties remotely.
Consider a FIFO worker living in Townsville who purchases an established house in the suburb at the current median of $700,000. Townsville City LGA recorded 1,469 house sales in the first half of 2026 at a median of $700,000, with typical weekly rent of $570, according to Opteon Solutions. Annual rental income is $29,640. An interest only loan at 6% on $700,000 costs $42,000 per year in interest alone. Before adding property management fees at roughly $1,630 per year, council rates around $2,500, landlord insurance near $800, and routine maintenance, the property is already negatively geared by more than $17,000 annually. At a marginal rate of 39% (the 37% tax rate plus 2% Medicare levy for income between $135,001 and $190,000), that loss saves the investor $6,630 in tax. At 47%, it saves $7,990. Those savings depend entirely on the property remaining negatively geared and the investor retaining access to negative gearing under the legislation as it stands or is enacted.
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Depreciation: Division 40 and Division 43
Depreciation allows you to claim a deduction for the decline in value of a building and its fixtures over time, even though you have not spent money in the current year. There are two types of depreciation available on residential investment properties.
Division 43 capital works deductions allow you to claim 2.5% of the original construction cost of a building each year for 40 years, provided construction commenced after 15 September 1987. You do not need to be the original owner. If you purchase an established property built in 1995 for $700,000 and can establish that the construction cost was $350,000, you can claim $8,750 per year under Division 43 for the remaining years in the 40-year life.
Division 40 plant and equipment depreciation covers items like carpets, blinds, hot water systems, ovens, air conditioners and dishwashers. From 7:30pm on 9 May 2017, individual investors who purchase established residential properties can no longer claim depreciation on previously used plant and equipment. You can only depreciate items you install yourself after settlement. If you purchase a new build, you can depreciate all plant and equipment as the original owner. A FIFO House and Land Package Loans transaction gives you full access to both Division 40 and Division 43 from day one.
You need a quantity surveyor's depreciation schedule to claim these deductions. The cost of the schedule, typically between $500 and $800, is itself immediately deductible under section 8-1. The ATO will not accept estimates or depreciation claims without proper supporting documentation.
Negative Gearing and the 2026 Budget Change
Negative gearing means you can offset rental property losses against your other income, reducing your taxable income and therefore your tax liability. Most rental properties in Australia are negatively geared in their early years because interest costs exceed rental income.
Using the Townsville example, a $17,000 annual loss on a $700,000 property saves a FIFO worker in the $135,001 to $190,000 income bracket $6,630 per year in tax. For a worker earning above $190,000, the saving is $7,990. Over a decade, that is between $66,300 and $79,900 in cumulative tax relief, assuming no change in rates or rents. The actual dollar benefit depends on your personal marginal rate, which you can verify at the ATO tax rates page.
On 12 May 2026, the Federal Government announced that negative gearing will be restricted for established residential properties purchased after 7:30pm on that date, effective from 1 July 2027. The legislation had not received royal assent at the time this article was compiled. Properties purchased before 7:30pm on 12 May 2026 are grandfathered and retain negative gearing regardless of the legislative outcome. New builds purchased at any time, before or after the cutoff, retain negative gearing.
If you purchased your FIFO Property before May 2026, your tax position is protected. If you are purchasing now, a new build allows you to retain negative gearing and access full Division 40 and Division 43 depreciation. An established property purchased after the cutoff will still allow you to claim all the deductions listed in TR 2026/1, but from 1 July 2027 those deductions can only be offset against the rental income from that property. You cannot use them to reduce your FIFO salary income. Losses are quarantined and carried forward to offset future rental income or capital gains on sale.
Interest Only Loans and Debt Recycling
An interest only loan for FIFO workers maximises the deductible portion of your loan repayments. Principal repayments are not deductible. Interest is. If you are negatively geared, paying interest only during the first five to ten years of ownership keeps your annual deductions as high as possible and defers non-deductible principal repayments until your income is higher or the property is positively geared.
Debt recycling is a strategy where you use equity in your owner-occupied home to fund the deposit on an investment property, then progressively pay down your non-deductible home loan while maintaining or increasing your deductible investment loan. Over time, you convert non-deductible debt into deductible debt without increasing your total borrowing. Debt recycling requires careful structuring and ongoing discipline, but it allows high-income FIFO workers to accelerate wealth accumulation while improving their tax position each year.
Both strategies are most effective when your marginal tax rate is high and your cash flow can support the interest cost. FIFO workers earning above $135,000 are in the ideal position to benefit from these approaches, provided they understand the ATO rules and maintain compliant records.
Record Keeping for Rental Properties
The ATO requires you to keep records for five years from the date the records were prepared or obtained, or five years after the relevant capital gains tax event, whichever is later. That includes loan statements, rates notices, insurance policies, management agreements, repair invoices, depreciation schedules, and rental income records.
The ATO has expanded its data matching program for rental properties. Rental income and expense data is now cross-referenced with third party reporting from property managers, insurers, councils and financial institutions. In the FY2024-25 compliance program, the ATO found errors in a substantial majority of rental property returns reviewed. The most common errors were incorrect claims for travel, capital expenses claimed as repairs, and overstated or fabricated deductions.
FIFO workers managing properties remotely should use cloud-based accounting systems or property management software that automatically categorises expenses and stores receipts digitally. You cannot claim a deduction without evidence. A digital trail is easier to maintain and retrieve than a box of paper receipts stored at a property you visit twice a year.
Call one of our team or book an appointment at a time that works for you. We work with FIFO workers across Australia and understand how rostered income, remote property management and the 2026 budget changes affect your tax position and borrowing capacity. Whether you are buying your first investment property or refinancing an existing loan to improve your structure, we can help you get it right.
Frequently Asked Questions
Can FIFO workers still negatively gear rental properties?
Yes, if you purchased before 7:30pm on 12 May 2026, your property is grandfathered and retains negative gearing. Properties purchased after that date lose negative gearing from 1 July 2027, but new builds retain it regardless of purchase date. Legislation had not received royal assent at the time this article was compiled.
Can FIFO workers claim travel to inspect their investment property?
No. Section 26-31 of the Income Tax Assessment Act 1997 prohibits individual investors from claiming travel to inspect, maintain or collect rent from a residential rental property. This restriction has applied since 1 July 2017 and applies to all individual investors, including FIFO workers managing properties remotely.
Does buying a new build improve the tax position for FIFO workers?
Yes. New builds allow full Division 40 and Division 43 depreciation from day one, and they retain negative gearing after 1 July 2027 regardless of the legislative changes announced in May 2026. Established properties purchased after 7:30pm on 12 May 2026 lose negative gearing from 1 July 2027, assuming the legislation receives royal assent.
What are the current marginal tax rates for FIFO workers?
For income between $135,001 and $190,000, the marginal tax rate is 37% plus 2% Medicare levy, totalling 39%. Above $190,000, the rate is 45% plus 2% Medicare levy, totalling 47%. Full rate tables are available at the ATO website.
