| What Investment Property Costs are Tax Deductible?

Nobody likes to pay more tax than they need to.  There are many tax advantages with investment properties that you don’t want to miss out on. 

Unfortunately most landlords are not totally aware of what they can claim.

You can only claim deductions during periods your property is tenanted or advertised for rent. You must keep all records to prove these business related expenses.   

The Australian Tax Office goes to great lengths to police the tax system for property owners so It is important to keep all receipts and get the professional advice of your accountant before making any claims.

As a general rule – You can claim a tax deduction if you incurred expenses relating to the maintenance or management of your investment property while the property is rented out or is being advertised for rent.

Here is a quick guide to help you investigate what you may be able to claim.

There are two types of tax deductible expenses for investment properties: 

1. Expenses you can claim in the same income year that you incur the expense. and
2. Expenses you need to claim over a number of years.

Marketing costs
You need to find tenants – Meaning you need to market your rental property, you can claim these marketing expenses against your income in the same year that you paid for them.

Loan Interest
For most investors, the largest expense is the interest on your mortgage. That interest and any bank fees for servicing that loan are normally tax deductible in the same financial year you paid it.  This must be interest on the loan directly related to the investment property.

Depreciation
As an investment property owner you may be able to claim deductions for the decline in value of the building’s structure and the assets within it.   In Australia this depreciation for residential rental properties is able to be claimed as a tax deduction.  

Depreciation can be claimed under two categories:

1. Capital works and 
2. Plant and equipment assets

We have a separate video that covers depreciation

Council rates Rates
You can only claim council rates for the actual number of days in which the house was rented. They can be claimed in the same financial year that they are paid. 

Body Corporate & Strata fees
You can claim the cost of body corporate fees.  Be careful if your body corporate fees include gardening,  you cannot claim these expenses separately as well.

Repairs and maintenance
If you have repairs or maintenance costs for your investment property, you can claim these as an immediate deduction.  This is for “Repairs & Maintenance” – which is different than for example replacing an appliance.  Replacing an appliance is usually a depreciation deduction, over the course of the asset’s lifespan.

Property Management.
If you have a property manager for your rental property, you can claim this expense as a tax deduction.

There are various other tax deductible expenses you may be able to claim.  For example:

• Electricity and gas (if they were paid by you)
• Landlord and building insurance
• Pest Control
• Garden maintenance 
• Legal expenses (that relate to the property rental activities)
• Bank charges (that relate to the property’s income)
• Bookkeeping 

There are some Notable exceptions including:

• Purchase or sale costs of property
• Any personal use of the property expenses incurred.

The Australian Tax Office requires you to keep records of all your expenses, otherwise they may not accept your claim.