If your investment property is performing well, it may be time to consider what you can claim and what you are entitled to claim. Investment properties that generate income could be eligible for thousands of dollars in depreciation deductions. As an investor, you don’t always need to spend money to claim the deductions.
Rental income is considered a taxable income
To reduce the taxable amount, you as the investor can claim the following expenses immediately:
– Property management fees and maintenance costs
– Advertising for tenants
– Bank fees
– Insurances
– Legal costs and land tax
– Property depreciation
– Pest control
– Gardening and lawnmowing
– Strata title fees and charges
These rates and taxes are also deductible immediately:
– Water rates, charges, and usage
– Council rates
Repairs and renovations can be claimed in the financial year they are completed
Make sure you understand the difference and how to claim for a repair and an improvement to the property. If you financed repairs to the property, the full cost can be claimed in the same financial year.
Plumbing, electric and handyman fees are all deductible immediately as they fall under the maintenance category.
If you have made any improvements to the property, this will be depreciated over time. The ATO pays particular attention to expenses claimed as repairs or maintenance if they are considered improvements.
A good example of the difference is fixing the broken glass on a window will be considered a repair but replacing the whole window frame will be an improvement.
Tax depreciation
A property’s general wear and tear can be claimed as a non-cash investment property tax deduction, also known as depreciation. Contact your tax accountant for a tax depreciation schedule, especially if it’s a newer home.
Interest on your home loan
If you took out a bank loan to purchase your investment property, you can claim the interest charged on the loan as a property deduction.
You can amend previous returns
Investors have the opportunity to amend two previous tax returns to recoup any deductions that were missed.
To make any kind of claim with the ATO you must ensure all receipts and expenses are kept and listed as proof. Electronic images of the items mentioned above will suffice, so you do not need to worry about a stack of physical paperwork in this case.
What expenses are not tax deductible
We’ve been through what you can claim, but what about the items that are off limits? Keep reading to find out.
– Purchase price of the property
– Stamp duty on the purchase
– Legal expenses
– Conveyancing fees
– Property inspection fees
– Renovations immediately after purchase
– Travel expenses to inspect your rental property yourself
This is a brief overview of tax-deductible items for investment property owners. To get professional advice specific to your situation, it is best to contact a property tax specialist, as the information is of a general nature. They will be able to guide you on your journey as an investor.
For more information about what you can claim, visit the ATO website here: https://www.ato.gov.au/Individuals/Investments-and-assets/Residential-rental-properties/rental-expenses-to-claim/
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