What tax deductions can I claim on my rental property?

Knowing what expenses to claim on your investment property at the end of financial year can be confusing for many landlords and investors.  Below is a general guide you can use to check and discuss with your accountants and advisers.

Click here if you would  like to download our handy Rental Property Tax Deductions Checklist.

Professional fees 

Accounting and bookkeeping - accounting and bookkeeping fees related to the management of your rental property, including bookkeeping and accounting software costs;

Agents fees and commissions for property management - the fees paid to your property manager or leasing agent for advertising, leasing and managing your rental property.  It is handy to ask your property manager for an end of year statement of fees and outgoings if it is not provided to you by default;

Lease preparation fees - including the registration and stamping of your lease;

Legal fees - for recovering unpaid rent, seeking damages for breach of agency agreement etc;

Quantity surveyors fees - for preparing your tax depreciation schedule;

Finance and borrowing expenses

Bank charges - for accounts used for collecting rent and paying outgoings;

Borrowing expenses - e.g. search fees, valuation fees, survey and registration fees, stamp duty, broker's commissions etc.  Note: borrowing expenses are deductible but not all at once - confirm these details with your accountants.

Interest expense on your loan - the interest accrued and paid on your investment loan;

Mortgage discharge expenses - including penalty interest on early loan repayment;

Pre-payments - full amount deductible up front if less than $1,000 and relates to a period less than 12 months (confirm with accountant);

Insurances

Insurance premiums - sickness and accident, building, fire, burglary, public liability, landlord insurance;

Mortgage insurance - treated as a borrowing expense;

Costs for repairing and maintaining the property

Repairs and maintenance - repairs and maintenance includes work done to the property that returns it to the condition it was in (no better) that when you purchased it.  Repair examples include roof repairs, fence repairs, repainting sections of your walls that have been damaged, replacing sections of damaged carpet, plumbing and electrical repairs.  Examples of maintenance includes regular cleaning (indoor and outdoor), pool maintenance, pest treatments etc.  Note that initial repairs completed before you begin to lease your property will be considered capital improvements and claimable over their effective life.

Property inclusions you pay for

Paid inclusions - such as security monitoring, in-house video, furniture in a furnished property;

Electricity, gas, water - any expenses not paid for by the tenant are claimable by the owner;

Building Write-Off and Depreciation 

Division 43 Building Write-Off - these are the deductions claimable for the built structure of the property for example the walls, roof, windows, doors, floor etc.  This applies to buildings built since 1987, or any buildings that have undergone capital improvements or additions in the last 30 years;

Division 40 Plant and Equipment depreciation- these are the assets within your property that are considered 'easily removable' or mechanical in nature, such as hot water system, air conditioning, lifts, kitchen appliances, carpet, blinds, light shades etc.  Different rules apply depending on when you bought your property and whether you purchased the assets brand new, or acquired them second hand.  If you purchased your property before 9th May 2017 you can claim for all assets brand new or acquired second hand.  If you purchased an established property after 9th May 2017, then there will be no depreciation claimable on the assets acquired second hand.  Assets included in brand new property purchases are always claimable.

For specific information relating to claiming for capital works and asset depreciation contact our team at Capital Claims Tax Depreciation on 1300 922 220 or [email protected].

Other general holding costs

Land tax - your land tax is claimable as a tax deduction;

Body corporate fees - excluding special purpose levy contributions for improvements or initial repairs;

Administrative expenses - including stationery, telephone calls and phone rental (when using to communicate with real estate agents, tenants, services and other matters relating to the property);

Travel expenses - to prepare for incoming tenants, to collect rent, to inspect the property during or at the conclusion of tenancy, to action repairs and maintenance, to inspect prior to purchase, visiting the agent to discuss the property.  These expenses will no longer be claimable after 30 June 2017.

Documents that will help

Documents that will help you to prepare your expenses for the year include:

  • Bank statements for any property related accounts;
  • Statement of income and expenses from your property manager;
  • Rates notices;
  • Invoices and receipts relating to your property expenses;
  • Insurance documents outlining your insurance premiums;
  • Tax Depreciation Schedule;
  • Travel log  book.
Check with your accountant!

Of course the information above is intended as a guide to help you prepare for end of financial year.  We recommend you confirming your claimable expenses with your accountant or the ATO.

If you are on the lookout for a great property accountant, we work with many pro-active and strategic accountants all around the country and would be pleased to recommend one to you.

Additional helpful links:

ATO Expenses you can claim - https://www.ato.gov.au/general/property/residential-rental-properties/expenses-you-can-claim/

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