An investment property can be a great foundation for wealth if you understand the numbers. It’s essential to know what you can and can’t claim as a tax deduction to ensure your investment makes financial sense.
This information is general and we always recommend that you talk to your accountant or financial adviser. This information is not financial advice and you should consider it educational only.
Be aware that the Australian Taxation Office changes their rules occasionally. And remember to keep all your receipts to claim against your tax.
What expenses are tax deductible?
Accountant – Only the time your accountant has spent working on this property.
Bank charges – Only those that relate to the property purchase and mortgage preparation.
Body corporate/strata Levies – Though if these include capital works, they may need to be depreciated.
Council rates – Only for the period of ownership.
Depreciation – The ATO may allow you to claim for capital works under a certain figure in the year you made the income. Otherwise you must claim them yearly over the life of the asset. Talk to your accountant about this.
Electricity and gas charges – This applies if you’ve contributed to the tenant’s costs or paid for a connection to the property.
Garden maintenance – Only for a third-party invoice, not your own time. Plants and shrub costs are also deductible.
Insurances – This includes building insurances and landlord protection insurance.
Interest – You can claim the interest component of your loan, but not the principal component. Your bank or accountant can provide a figure for the total interest you’ve paid over the year.
Land tax
Legal expenses – Only for the related property.
Marketing costs – You can claim the cost of finding a new tenant.
Pest control
Property management fees
Repairs and maintenance – This includes repairs to existing appliances and chattels. If you replace an item, this becomes a capital cost. It may be claimed in the year or may need to be depreciated over time.
Water rates
What expenses are not tax deductible?
Stamp duty – You can’t claim it against your income, but can use it to calculate your net capital gain.
Personal expenses – If you’ve used the investment property for personal use, you can’t claim these costs.
Want to know more?
If you have any queries or would like advice on purchasing an investment property, contact Alan Bourke or anyone from Bourkes on (08) 9474 2000.
