Many taxpayers don’t know what rental expenses they can and can’t claim, losing out on potentially deductible expenses.

Here is a list of items to help with that.

Rental Property Deductions Claimable When Incurred

  • Advertising for tenants
  • Bank charges on rental property loan
  • Cleaning
  • Council Rates & Water Charges
  • Gardening/Lawn Maintenance
  • Landlord and Building Insurance
  • Land taxes
  • Pest Control
  • Agents Fees & Commissions
  • Repairs and Maintenance (The repairs must relate directly to wear and tear or other damage that occurred as a result of your renting out the property).
  • Stationery, Telephone and Postage

Keeping up to date records and receipts is very important. The ATO may audit rental property schedules at any time.

Rental Property Deductions Claimable Over A Number Of Years

  • Borrowing Expenses claimed over five years   
  • Depreciation on Plant
  • Initial Construction Costs on newer homes (even if you did not build the property – see below)
  • Borrowing Costs (the initial fees and insurance costs in setting up the mortgage)
  • Some major repairs and upgrades

Capital Costs Which Can’t Be Claimed As Deductions (but may be claimed against Capital Gains)

    Legal conveyancing costs on Purchase
    Legal conveyancing costs on Sale
    Stamp Duty
    Initial Construction Costs on older homes
    Some Major repairs and upgrades

Take Care: Deductibility of Interest

If you take out a loan to purchase a rental property you will generally be entitled to claim the interest (or a portion of the interest) as a deduction. The property must be rented, or available for rental, in the income year for which you claim a deduction. You may also claim interest on loans taken out to purchase items of plant, for renovations, or for repairs to the property occasioned by your use of the property to produce assessable rental income.

Note, however, that a deduction is not claimable simply because you use the rental property as security against the loan. The key factor is the purpose for which the money is used. The security pledged for the asset is irrelevant.

For example, if you borrow against the equity in a rental property to purchase a private residence (or for any other private purpose) the interest will not be deductible. The reverse is also true. i.e. if you borrow against the equity in your own home to purchase an investment property, the interest will be fully deductible regardless of the fact that a private residence is given as security.

Depreciating Established Homes

Claiming depreciation for assets (such as dishwashers, floor coverings, curtains, etc) is not limited to items you purchase once you own the house. Claims are available for existing assets.

Similarly, claiming the Building Writeoff is not limited to people who build their own homes. If you buy a relatively new home (i.e. one built in the last couple of decades) there may still be a substantial claim you can make.

How do you access these deductions? You need to engage the services of a quantity surveyor to appraise the house and fittings, and to prepare a depreciation report.

These reports generally cost $500 - $600. This cost is generally recouped within the first year or two because of the tax savings that wouldn’t otherwise be available to you.

If you’d like more information on anything listed, or a referral to a local Quantity Surveyor, contact Antree.

If you have any questions about what you can claim for your rental investment, contact us.