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 when it comes to claiming your investment property tax deductions.
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.
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).
Insurance premiums - sickness and accident, building, fire, burglary, public liability, landlord insurance;
Mortgage insurance - treated as a borrowing expense.
Repairs and maintenance - repairs and maintenance includes work done to the property that returns it to the condition it was in (no better) than 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.
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.
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 (and rented) 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 on the assets acquired second hand, however, brand new assets that you install are claimable. A brand new investment property’s assets are always claimable.
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);
Documents that will help you with your investment property tax return
Documents that will help you to prepare your expenses for the year include:
Investment property tax deductions: check with your accountant!
Of course, the information above regarding what you can claim on your investment property 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 upon completing your investment property tax return.
If you are on the lookout for a great property accountant, we work with many proactive and strategic accountants all around the country and would be pleased to recommend one to you.
ATO Expenses you can claim here