Rental Property Tax Deductions

RENTAL PROPERTY TAX DEDUCTIONS

Make sure you’re claiming all your rental property tax deductions
property
Rental property tax deductions can be confusing so we thought we would expel a few myths and clarify a few essentials when it comes to claiming your property expenses.
Often, a rental property is expensive to maintain, especially if you have gaps between tenants. However, provided you purchased a solid property in a good or progressive suburb, it generally serves as a good long term investment for your future. Plus, rental property tax deductions can be a good way to boost your tax refund.

Another plus is – for the meantime at least – if your interest payments and expenses on your investment property are greater than the income you receive from tenants, you claim that loss as a rental property tax deduction each year.

When your outgoings on your rental property are more than your income, your property is negatively geared for tax purposes.

A FEW IMPORTANT POINTS TO REMEMBER -
RENTAL PROPERTY DEDUCTIONS

Immediate Deductions

All rental property operational expenses are immediately deductible in the year they were incurred. This includes council rates, land tax, repairs, pest control, gardening and mortgage interest.

Borrowing Expenses

When you purchase your rental property borrowing expenses are claimed as a rental property tax deduction. These borrowing costs can be claimed over a 5 year period.

Depreciation

The cost of a capital item for your rental property (e.g. carpet, air conditioner) is claimed across the item’s “effective life”. The ATO considers effective life as the length of time an item will be usable.

Claimed Over Time

The cost of your rental property building and renovations and new capital works (e.g. a new roof or driveway) are claimed over the efffective life of the capital works.

Did You Buy It Yourself?

You can claim depreciation for items that you have purchased for your rental property. You can also claim depreciation for existing items in a rental property if purchased before 10 May 2017.

Initial Repairs

Initial repairs or improvements made to a rental property after purchase, but prior to renting, are also a deductible expense over the effective life of the repair.

Items Less Than $300

For capital Items purchased for a rental property that cost below $300 (e.g. ceiling fan or bathroom mirror ) the full amount can be claimed as a deduction in the same tax year.

Available For Rent

It’s important to note that you can only claim rental property tax deductions for the period of the year that the property was tenanted, or actively advertised as available for rent.

Common rental expenses that are immediately deductible.
  • Advertising fees
  • Management fee
  • Quantity surveyor fees
  • Body corporate fees
  • Council rates
  • Water rates
  • Gas and electricity bills
  • Land tax
  • Insurance
  • Interest on loans
  • Property maintenance
  • Property repairs
  • Garden maintenance
  • Pool maintenance
  • Servicing costs
  • Cleaning
  • Pest control
  • Stationery
  • Postage
  • Telephone calls
  • Internet access
  • Bookkeeping costs
  • Tax agent and accounting fees
  • Insurance payments
  • Some legal expenses (i.e. related to evicting tenants) N7
Rental property expenses claimed over time.
  • Stamp duty on loans
  • Loan set up fees
  • Fees for title searches
  • Solicitor fees related to loans
  • Broker fees
  • Valuation fees
  • Mortgage insurance
  • Depreciation of capital items over $300 (washing machines etc.) only if purchased by you
  • Capital Works (improvements or additions to the property – kitchen renovation, new gazebo etc.)
  • Claim these amounts when you sell the property:
  • Sale and purchase amounts (as per Settlement Statements)
  • Legal costs for purchase and sale (including property stamp duty)
  • Building inspections (prior to purchase)
  • Building additions since purchase
  • Initial repairs
ONLINE TAX DEPRECIATION APPLICATION - RESIDENTIAL PROPERTIES

Our online checklist asks a number of questions regarding your investment property and takes approximately 15 minutes to complete. Our consultants will analyse the information you have provided and work with our ATO approved quantity surveyors to provide a depreciation schedule for your rental property.