Property investors and tax: What can you claim?
If you are a landlord, there are many ways to minimise your annual tax bill. From appliance depreciation to knowing what you can and cannot claim on things such as advertising costs and body corporate fees.
The following list of landlord requirements, will give you some valuable insights into what you have to do as a landlord to maintain your property, as well as the things you can and can’t claim when tax time comes around.
Rental advertising costs
Landlords use a wide variety of methods to advertise for a new tenant. Advertising can be conducted online, or with brochures or signs. Whichever method you choose you can claim these advertising expenses against your income, provided they occurred in the same financial year that you paid for them.
Council rates cover part of the cost of providing a range of services and infrastructure projects to your area. Rates can be claimed in the year that you pay them, but only if the property was tenanted during this time. If it was vacant for a certain amount of time, you can’t claim for the vacant portion.
Strata and body corporate fees
If your property is on a strata title, you can claim the cost of body corporate fees.
With a strata property, you have individual ownership over your apartment, unit or townhouse in addition to shared ownership over the ‘common property’, such as common walls, driveway, foyer, gym and garden. The common property is then managed by an owners’ corporation.
Interest on your loan
Investors can claim any bank fees and interest that’s charged on a loan that is for an investment property. You cannot claim on any payment made against the principal or on any part of a loan that has been used for personal reasons. You can only claim the interest of the investment loan.
Repairs and maintenance
The cost of any repairs or maintenance on the investment property can be an immediate deduction if it is directly related to wear and tear.
If you need a personal loan to make any major maintenance repairs, you can compare by secured and unsecured personal loans.
However, replacing an appliance comes under a different category and you will need to claim that cost as a depreciation deduction over the course of its expected lifespan.
Many rental properties are fitted with dishwashers, air conditioners and stoves. These types of appliances decline in value from the date of purchase. The landlord can claim this depreciation over a certain amount of years.
Any insurance on a rental property can be claimed back such as building and landlords insurance.
All fees or commissions paid to agents are tax deductable. Agents fees are usually for services such as advertising the rental property, vetting applicants, collecting rent and organising maintenance.
Garden and maintenance
Landlords can claim the maintenance and replacement of plants and structures as an immediate deduction. However, claiming for any new changes that increase the value to the property are regarded as improvements. These belong in the depreciation category.
Any fees paid for advice, preparation of tax returns and expenses incurred for management can be claimed in the same year the costs were incurred. It must be for your investment property only, not your personal taxes.
All fees for legal documents and advice in relation to your investment property are tax deductable. This includes in the instance of eviction, or recovering unpaid rent.
Capital gains tax
Capital gains tax is a government fee owing on the profit made from selling an asset. It is calculated as the total sale price minus the original cost. If you own the property for more than 12 months, capital gains attracts a 50% discount. However, if you sell your investment within 12 months of purchasing it there is no discount on the amount of tax payable and the gain is added to the investor’s income tax for that year.
What you can’t claim
- While there are many things you can claim, the following are items that you cannot claim.
- Utility bills paid by the tenant
- Personal expenses as they relate to the property
- Interest expenses where money you’ve borrowed against the property is used for private use
- Buying and selling expenses, such as advertising, legal fees and sales agent commissions.
This update is not financial advice. This article is general news and information.
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