It can be surprising how many of the expenses associated with owning a rental property can be claimed as a tax deduction.
The general rule of thumb is that you will need a receipt to claim property expenses, so it’s important to keep good records. And while your tax adviser can provide tailored details on what can be claimed in your personal circumstances, let’s look at some of the main expenses that are normally tax deductible for landlords.
In general you should be able to claim:
- Advertising for tenants, re-letting costs and ongoing property management fees. Your property manager should provide an annual tax statement itemising these costs
- Loan interest and ongoing loan fees. These will be shown on your loan statement
- Council rates, and land tax. Strata levies/and or body corporate fees for apartments, townhouses and villas are typically tax deductible
- Building and landlord insurance
- Stationery, phone costs and any travel to inspect the property
- Accounting or bookkeeping fees
Tread carefully with repairs
One area to be extra careful with is repairs. The cost of ongoing maintenance like pest control and gardening is generally tax deductible but repairs can be a little more problematic.
If you replace something altogether, like, say, a broken hot water heater, this goes beyond a repair and becomes an ‘improvement’. In this circumstance you can’t usually claim the cost of the improvement outright but you should be able to depreciate the value of the item over a number of years.
Depreciation – boost your deductions
In fact depreciation is an important tax deduction for landlords. Property investors can claim depreciation on a broad range of rental property items including built-in kitchen cupboards; clothes lines; door and window fittings; driveways and garages.
Interior fittings can also be depreciated – like carpets, vinyl, linoleum, blinds, curtains and air conditioning units.
One of the best ways to maximise the depreciation expenses that you are legitimately entitled to claim is by arranging for a quantity surveyor to prepare a formal depreciation schedule for your property.
The cost of this can also be claimed on tax, and it can be a sensible investment as it has the potential to really boost your tax deductions and therefore provide valuable tax savings.
Do note, there are some expenses that property investors cannot claim an immediate deduction for.
This includes the costs of buying the property like legal fees and stamp duty. These can usually be added to the cost base of the property, to reduce any capital gains tax that may be payable when you sell your investment property.
For more details on what you claim on your rental property, take a look at Aussie’s property investor guide. You may also find the guide for rental property owners put out by the tax office helpful. It explains how to treat rental income and expenses in your tax.
What’s your tip for keeping on top of what you can and can’t claim on your tax? Please share your tips and comments on the blog comments.
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