| What Investment Property Costs are Tax Deductible?
When it comes to investment properties, there are many tax advantages you don’t want to miss out on. Unfortunately, most landlords are not fully aware of what they can claim. You can only claim deductions during periods when your property is tenanted or advertised for rent, and you must keep all records to prove these business-related expenses. It’s important to get professional advice from your accountant before making any claims, as the Australian Tax Office closely monitors the tax system for property owners.
As a general rule, you can claim a tax deduction for expenses incurred relating to the maintenance or management of your investment property while the property is rented out or being advertised for rent. There are two types of tax-deductible expenses for investment properties:
- Expenses you can claim in the same income year that you incur the expense.
- Expenses you need to claim over several years.
Here’s a quick guide to help you investigate what you may be able to claim:
Marketing Costs: You can claim the marketing expenses against your income in the same year that you paid for them.
Loan Interest: For most investors, the largest expense is the interest on their mortgage. That interest and any bank fees for servicing that loan are normally tax deductible in the same financial year you paid it. This must pertain to the loan that is directly related to the investment property.
Depreciation: As an investment property owner, you may be able to claim deductions for the decline in value of the building’s structure and the assets within it. In Australia, this depreciation for residential rental properties is tax-deductible under two categories: Capital Works and Plant and Equipment Assets.
Council Rates: You can only claim council rates for the actual number of days in which the house was rented. They can be claimed in the same financial year that they are paid.
Body Corporate & Strata Fees: You can claim the cost of body corporate fees. Be careful if your body corporate fees include gardening, as you cannot claim these expenses separately.
Repairs and Maintenance: You can claim immediate deductions for repair or maintenance costs for your investment property. This is different from replacing an appliance, which is usually a depreciation deduction over the course of the asset’s lifespan.
Property Management: If you have a property manager for your rental property, you can claim this expense as a tax deduction.
There are other tax-deductible expenses you may be able to claim, such as electricity and gas (if paid by you), landlord and building insurance, pest control, garden maintenance, legal expenses related to property rental activities, bank charges related to the property’s income, and bookkeeping.
Notable exceptions include purchase or sale costs of property and expenses incurred from personal use of the property. The Australian Tax Office requires you to keep records of all your expenses; otherwise, they may not accept your claim. It’s always best to speak with a professional financial advisor or accountant for advice on your investment strategy and tax implications.
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This is not meant to be financial or professional advice and is only of general nature. You must seek professional advice before taking any actions. The above information comes with no warranties whatsoever. We take no responsibility for any actions you may or may not take. All content is of general nature only and is NOT to be taken as advice whatsoever