Owning an investment property is a little like running a business. It provides a great source of income and builds personal wealth but inevitably comes with a series of costs that hit your bottom line.
The great news for property investors is that many of these expenses are currently tax-deductible.
It is a common misconception that tax advantages are only available on new properties. This is not true. While an older building might limit what you can claim, you do not have to buy a new house or apartment to qualify for tax benefits.
There are two main components of a tax claim for a rental property. These are:
- Capital Works Allowance – this covers the structure such as walls and roof tiles, and
- Plant & Equipment – this covers the so-called removable assets such as carpets, ovens and hot water system.
It is important to obtain professional financial advice to understand exactly what can and cannot be claimed. Be aware that the IRS tends to change the rules regularly.
In general, you will find the following items are tax-deductible:
- Costs associated with using a professional service to find a tenant
- Accounting and professional financial advice
- Strata levies
- Rates and any land tax
- Insurances
- Loan interest and ongoing loan fees
- Travel to inspect the property and any allied, legitimate business expenses.
Work with your accountant or financial adviser to build a tax depreciation schedule for your property.
It should need to be completed only once and can then be submitted to the tax office each year to ensure you obtain the maximum possible tax benefits from your rental property.