Owning an investment property can offer attractive tax advantages in exchange for contributing to the nation’s supply of rental accommodation.
In order to claim these advantages, it’s extremely important to keep your receipts. Being organised always helps maximise your tax position.
Using a property manager can make this easier as you’ll receive an annual income and expenditure report. This improves the accuracy of your return and can help result in a faster refund.
Remember that deductions can only be claimed for when tenants occupy the property or when it’s genuinely up for rent. If you’ve had renters for only six months of the fiscal year, you might be entitled to half of what you’d typically expect.
Here are 10 general tax advantages from an investment property that you may be able to claim. But always work with your accountant who will tailor his or her advice to you specifically. That way you’ll not miss out on a claim or breach a rule that risks an audit.
1. Rental advertising costs – If you’ve had to find a new tenant, your marketing expenses are a legitimate claim.
2. Interest on your loan – Together with bank fees, the interest that you’ve paid on your mortgage (not the reduction of the principal) can be claimed.
3. Council rates – While these are an annual cost, they can be claimed only for the period during which a tenant is in residence.
4. Insurance – You’ll likely have a landlord insurance policy and also building insurance. These are expenses that in most cases can be claimed.
5. Land tax – Consult your accountant before making any claim, or find the latest rules on the ATO’s website. Look for the “residential rental properties” area but it is worth discussing this expense with your accountant.
6. Strata fees – Like rates, these can be claimed for the period you have a tenant in the property.
7. Depreciation – This can be a big-ticket item. You should have had a quantity surveyor create a depreciation schedule. Claims can cover contents such as appliances, carpets and blinds and, if within the rules, renovations and the building structure. Speak to your accountant before organising a depreciation schedule.
8. Maintenance – Claims are accepted if they relate to general wear and tear but not if they are replacing or adding to the value of the asset. Don’t confuse maintenance with depreciation. If a stove breaks and you replace it, that’s not maintenance; the new stove has to be depreciated.
9. Garden – This is another confusing area. You can claim costs of upkeep, such as lawn-mowing. Any expenses that add value to the property, such as a retaining wall, must be depreciated.
10. Professional services – Your property management fees, costs associated with accounting, book-keeping, and any legal expenses can all be claimed.
- This article is provided for general information only and does not take into account the specific needs, objectives or circumstances of the reader. Before acting on any information, you should consider whether it is appropriate for your personal circumstances, carry out your own research and seek professional advice.