Rental Property Renovations: Where to Spend for Maximum Returns

The kitchen and bathroom are the most used areas in any home, making them prime candidates for upgrades. Modernising cabinets, installing energy-efficient fixtures and updating appliances can justify higher rent and attract long-term tenants. Simple changes like replacing taps and adding additional storage can make a significant impact without a hefty price tag​.

Tip: Focus on improvements that balance appeal and function, such as replacing benchtops or adding energy-efficient appliances. Avoid overcapitalising by sticking to simple, modern designs that appeal to a broad range of tenants.  

Tax insight: Kitchen and bathroom upgrades may qualify for capital works deductions, allowing eligible landlords to claim 2.5% of the construction costs annually over 40 years.

Energy-efficient upgrades benefit both landlords and tenants. Adding solar panels, LED lighting or energy-efficient appliances reduces tenant utility bills, which appeals to both environmentally aware and budget-conscious renters.

Tax insight: Improvements like solar panels may qualify for depreciation deductions, with certain assets depreciating over multiple years, helping to offset renovation costs through tax savings.

A fresh coat of paint and upgraded flooring and window treatments can instantly refresh a space, making it more appealing to prospective tenants. Neutral colours work best, offering a clean slate that tenants can personalise.

Tip: Vinyl or hybrid flooring is a durable and low-maintenance choice for high-traffic areas.

Tax insight: Painting is typically considered a maintenance expense and may be immediately deductible. However, new flooring is treated as a depreciable asset.

Smart home features like automated lighting, keyless entry and security cameras attract quality tenants and justify premium rent. These upgrades also position the property competitively in the rental market by offering tenants convenience and peace of mind​.
Tax insight: Smart home devices qualify as depreciating assets. Landlords can claim a percentage of the asset’s value each year, reducing taxable income over time.

Landscaping and outdoor upgrades, like creating a patio or adding a small garden, boost tenant satisfaction and extend the property's usable space. Attractive outdoor areas increase the property's appeal and rental value, especially in family-friendly markets​.

Tax insight: While general landscaping may not be deductible, certain capital improvements, like adding decking, can be claimed through capital works deductions over several years.