16 types of tax deductions to claim on your investment property

By Grace Ormsby

June 25 2020
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There are several big-ticket items you should be claiming on your investment property this tax time – have you accounted for them all?

tax deductions to claim on your investment property

Tamara Wrigley, a property manager and developer with Carolans First National Real Estate Sunshine Coast and Hinterland, has highlighted that with tax time just around the corner, “the good news is there are many ways to reduce annual amounts”.

“Deductions can sometimes be the difference between your investment having a positive or negative cash flow,” she said.

It’s why she’s written up a list of the key deductions that property investors should be considering or, at the very least, enquiring with their accountant about.

Rental advertising

Regardless of whether you are looking for a first tenant, or re-letting, Ms Wrigley said the costs associated with any online advertising, print media, flyers and brochures or signs can be claimed against property income in the year you paid them.

Loan interest

“One handy item to remember is that interest on investment loans and bank fees spent servicing the same loan are tax deductible,” the property manager flagged.

In saying that, it’s important to note that you can’t claim repayments or interest on the whole sum if part of the loan is refinanced for private purposes.

Council rates

These can be deducted in the year they are paid, as long as you only do so for times when the property is rented out.

Land tax

According to Ms Wrigley, it’s okay to deduct land tax as long as you have a rented dwelling on your property.

But do realise that land tax is a state-based tax, so be sure to check out local regulations and talk to your accountant.

Strata fees

Properties on strata title are allowed to claim body corporate fee costs.

This fee does include maintenance and garden expenses, so Ms Wrigley warns against attempting to claim these costs separately.

Building depreciation

This deduction is “very dependent on when your property was built and its age”, the property manager explained.

“Any property constructed prior to 16 September 1987 can’t have original construction costs claimed on it, although after that date you are allowed to claim 2.5 per cent depreciation a year for 40 years.”

Appliance depreciation

Like building depreciation, the age of your appliances will determine your claim eligibility.

“Only people who purchased a property before 7.30pm on 9 May 2017 and installed appliances prior to July 2017 can claim deductions on new or second-hand appliances. Rules also apply to depreciating an asset that another owner or person may have already processed.”

Repairs and maintenance

Repairs that relate directly to wear and tear can be deducted.

This includes roofing after a storm or essential appliance repairs – but where full replacements are done to appliances, such deductions cannot be applied.

Pest control

According to Ms Wrigley, this is a deduction that can be made by a landlord or the tenant, depending on who paid for the service.

Garden and maintenance

The cost of upkeep and replacement of plants and structures can be deducted in a tax claim, but the one rule here is that any works or plants that add value to the property cannot be deducted, Ms Wrigley said.

Insurance

Protecting your investment through the use of insurance is claimable.

Bookkeeping costs

Ms Wrigley flagged that direct costs related to preparing tax returns and expenses as they relate to the property are deductible; however, “it’s essential to realise personal income tax preparation is not”.

Ms Wrigley did concede that this could be claimed separately against an individual’s personal income tax return.

Travel costs

While it wasn’t previously the case, only excluded entities and landlords involved in active property investment business are now permitted to receive deductions for travel costs.

Agent fees

“Property management costs are deductible and play a role in ensuring your investment is well maintained, rents are at good market rates, and professional, communicative relationships with tenants are maintained,” Ms Wrigley said.

Stationery and phone costs

Like any business, the property expert said the material you use and the calls you make in the running of your investment can be deducted from your taxable income.

Legal expenses

This form of tax deduction is subject to change, but Ms Wrigley highlighted that under the current government, if you need to evict a tenant and incur losses as a result, “any costs incurred relating to preparing legal documents or going to court can be treated as a tax deductible claim”.

For anyone who is navigating tax time as a property investor, Ms Wrigley said other good things to bear in mind when managing property taxation include:

Staying organised and maintaining good documentation,
Setting rents at levels that are high enough to be deducted against (no mates rates),
Being careful what you claim regarding holiday homes (exclude personal use),
And not missing a trick with the many deductions listed above.

She also warns that rules and legislation can change suddenly, so the property manager has warned Australians to “make sure you, or your accountant, are across the most recent changes as they happen”.

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About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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