From my experience as a Chartered Accountant and Certified Financial Planner many property investors do not claim all the tax deductions they are entitled to. To assist you to legally minimise your taxation liability this year I have prepared a comprehensive list of tax deductions.
Rental property expenses;
- Advertising for tenants
- Bank charges
- Body corporate fees and charges
- Borrowing expenses include mortgage set up cost like loan establishment fees. These are usually claimed over a five year period.
- Capital works. With regard to capital works deductions, these deductions generally relate to building and construction cost, the cost of altering a building and the capital cost to make improvements to the property. Generally you are entitled to a two and a half per cent per year write off on these costs. However, with regard to residential properties you are only entitled to this write off if the property was built (not acquired) after 17 July 1985.
- Cleaning
- Council rates
- Depreciation of fixture and fittings. Normally when you purchase the property you would engage a Quantity Surveyor to provide you with a listing of the fixtures and fittings of the property and the depreciation that you are entitled to claim on those items.
- Gardening and lawn mowing
- Insurance – building, contents and public liability (this may be included om the Body Corporate fees)
- Interest expenses. You are only entitled to the interest component of your mortgage repayments not the total mortgage repayments. That is, the principal component of the mortgage repayment is not tax deductible
- Land tax
- Legal expenses
The types of legal expenses you can claim include;
- evicting a non-paying tenant
- expenses incurred in taking court action for loss of rental income
- defending a damages claim in respect of injuries suffered by a third party on your rental property
You cannot claim the cost of;
- solicitor’s fees for the purchase of the property (these are a capital expense)
- solicitor’s fees for the preparation of loan documents (can be claimed as borrowing expenses)
- Pest control
- Property agent fees and commissions
- Repairs and maintenance. This is probably the most complicated area. In general you can claim for repairs to restore the property to its initial condition when you purchased it due to the wear and tear of the tenant. That is, improvements that you made after buying the property are classified as initial repairs and not deductible. For example, you purchase the property, paint the walls install a new kitchen, they are not deductible. However, if you paint the walls after the tenant moved out because they left it in a mess, it is tax deductible.
Also any expenditure that is seen to be an improvement is not a tax deduction for the purpose of a repair. For example, replacing the curtains with blinds, installing a new kitchen, renovating the bathroom. However, you may be able to depreciate those capital improvements.
- Stationery and postage
- Telephone charges
- Travel to inspect or maintain the property or to collect the rent
- Water rates
Hope this list assists you in legally minimising your Tax. If you have any questions please contact
Peter Quinn by submitting an
online enquiry or calling us on +61 2 9580 9166 to book an
obligation free appointment.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.
