Which property costs are tax-deductible?

As a property investor, there are countless deductible expenses you can claim to reduce your tax bill at the end of the financial year. Unfortunately, up to 80% of investors don’t take the time to make sure their returns are correctly prepared and end up paying more tax than they need to.

Make sure you don’t make that same mistake. Check out our guide to tax deductible property investment costs.

THE RULE OF THUMB

Generally, if you incurred an expense relating to the maintenance or management of your investment property while it’s rented out or available for rent, you can claim it as a tax deduction. Notable exceptions include:

• Any expenses incurred for the personal use of the property.
• Purchase or sale costs of an investment property.
• Expenses incurred by your tenants such as utility bills.

As with everything tax related, you should keep records of every expense you incur otherwise the Australian Tax Office may not accept your claim.

Deductible expenses

There are two types of tax deductible expenses for investment properties: those you can claim in the same income year that you incur the expense and those you claim over a number of income years.

These expenses must all have been genuinely incurred by you during the management of the property.

Expenses claimable in current income year

• Advertising for tenants
• Bank charges relating to the property’s income or management
• Body corporate fees and charges
• Council rates
• Electricity and gas (if they are paid by you)
• Gardening and lawn mowing
• Insurance including: building, landlord and public liability policies.
• Mortgage interest
• Lease document
• Pest control
• Legal expenses excluding borrowing and acquisition costs
• Property agent’s fees and commissions
• Repairs and maintenance
• Certain travel expenses

Expenses claimable over several income years

There are three types of property investment expenses that you may be able to claim over a number of income years:

1. Borrowing expenses including loan establishment fees, costs for preparing and filing mortgage documents and stamp duty charged on the mortgage.
2. Amounts for decline in value of depreciating assets (allowed only in certain circumstances).
3. Capital works deductions.

Calculating the second type of claimable expense – depreciation – can be a little complicated. It applies to removable fixtures that were in the property when you bought it, like the stove, dishwasher or curtains, and covers the theoretical cost of their declining value over the years.

WHEN IN DOUBT SEEK HELP

Australia’s complicated tax system can confuse even the most financially savvy among us. If you’re not confident that you’re getting every deduction and concession you can out of your property portfolio, speak to a specialist property accountant for peace of mind.