Make sure you are maximising the tax deductions for your investment property this financial year. Bigger tax deductions means less tax payable to the ATO, and a much needed tax return for many investors.
Here we look at the 5 biggest tax deductions claimed by landlords each year.
Include these in your tax return where they are applicable to you, and you are on your way to maximising your cash returns.
1 - Interest and Fees on your investment loan
If you took out a bank loan for the purchase of your rental property, you are entitled to claim a deduction for the interest charged on that loan.
This means that if you paid $15,000 interest for the financial year and bank fees of $150 during the same time period, then you can claim that full $15,150 as a tax deduction.
If your property was rented out for only part of the year, then your accountant can make a pro-rata claim for the period that it was leased.
2 - Capital Allowances and Depreciation (Division 43 and Division 40)
These tax deductions are for the general wear and tear and ageing of your property over time.
Together, these deductions are some of the biggest tax deductions claimable by investors, and are also the most often missed.
Speak with a quantity surveyor to find out what deductions you could be claiming on your property because results vary depending on the type of property, when it was bought, how old it is, how long you’ve owned it, and any improvements made to the property.
A quantity surveyor will consider all of this data and more, and complete a tax depreciation schedule for you. This tax depreciation schedule tells you the total amount you can claim every year. Learn more about depreciation schedules here.
3 - Property advertising and management fees
Any fees that you have incurred while attempting to find a tenant for your property (online/print/signage etc) can be claimed against the income generated by that property. Likewise, any fees, payments or commissions paid to your agent to manage your property during this time can also be claimed.
4 - Insurances
One of the most important expenses you will have will be the cost of your insurance premiums and this too can be claimed against your rental property. Should you need to claim part of this expense due to a partial rental year or multiple properties insured together – your insurance provider can help with a breakdown.
5 - Repairs and property maintenance
Repairs and maintenance are the works that you complete in order to remedy a defect or to prevent and/or fix deterioration.
These repairs and maintenance works can be claimed in the current year as a deduction and include repainting a room, mending fence palings, regular maintenance of a swimming pool filter or having an electrician fix a broken fan.
Keep in mind that any works completed to improve the property beyond its original condition at purchase are likely to be considered capital improvements and will be claimable under number 2. To learn more about the difference between repairs and maintenance and capital improvements check out our blog here.
To make sure you don’t miss these 5 (or any other) deductions that you may be entitled to, download our easy to use and FREE Residential Property Tax Deduction Checklist!
Important Note: tax deductions, eligibilities and results will be different depending on your circumstances and we recommend you seek the advice of your accountant to ensure you are claiming your tax deductions correctly, and in accordance with your personal circumstances.
Mark is an expert quantity surveyor, business owner, public speaker and property developer. With 20+ years experience in the construction and quantity surveying industry Mark’s specialist expertise have been sought in consultant capacity by professional bodies such as the National Institute of Accountants and the National Tax and Accountants Association, and he has presented at various property and tax seminars and expos nationwide. Mark holds a Bachelor of Construction Management from the University of Newcastle, is an affiliate member of the Australian Institute of Quantity Surveyors and a Registered Tax Agent.View all posts by Mark Wilkins