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 

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.

Appliance depreciation

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. 

Insurance

Any insurance on a rental property can be claimed back such as building and landlords insurance.

Agents fees

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.

Bookkeeping costs

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.

Legal expenses

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.

Home Loans: The comparison rates are based on a secured loan amount of $150,000 and a term of 25 years.

Personal Loans: The comparison rates in this table are based on a loan of $30,000 and a term of 5 years unless otherwise indicated in the product name with^, in which case, the comparison rate is based on a loan of $10,000 and a term of 3 years. The comparison rates are for unsecured personal loans only for the relevant amounts and terms. The comparison rates for car loans and secured personal loans are for secured loans unless indicated otherwise.

WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. Comparison rates are not calculated for revolving credit products.

The products compared in this article are chosen from a range of offers available to us and are not representative of all the products available in the market and influenced by a range of factors including interest rates, product costs and commercial and sponsorship arrangements

InfoChoice compares financial products from 145 banks, credit unions and other financial institutions in Australia. InfoChoice does not compare every product in the market. Some institutions may have a commercial partnership with InfoChoice. Rates are provided by partners and taken from financial institutions websites. We believe all information to be accurate on the date published. InfoChoice strives to update and keep information as accurate as possible.

The information contained on this web site is general in nature and does not take into account your personal situation. Do not interpret the listing order as an endorsement or recommendation from us. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.

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