Rental Property Tax Tips

Rental properties are high on the ATO’s list of audit targets so ensuring you get your tax-deductible claims right is vital.

General Rule

You can claim a tax deduction for certain expenses you incur for the part of the year your property was available for rent. To be available for rent, the property must be either:

1. Advertised, giving it broad exposure to potential tenants; or

2. Considering all the circumstances, tenants are reasonably likely to rent the property.

If your property is available for rent for only part of the year, you can only claim a deduction for the portion of any expenses that relate to the period that the property was rented out.

Interest Deductions

Whether or not interest is deductible is determined by how the funds were spent rather than the property upon which the loan is secured.

For example, if you refinance and draw equity out of your rental property to purchase or renovate your home, this will not be deductible even though the loan is your rental property loan.

Repairs V Capital Expenditure

You can claim an immediate tax deduction for amounts spent on Repairs & Maintenance of your property, but capital expenditure will have to be written off over a period of time.

The determining factor is generally whether or not the expenditure brought the property back to its original condition (Repair) or if it improved the condition of the property (Capital).

For example, if a tin roof needs repair and you replace it with an equivalent tin roof, that will be regarded as a repair and can be deducted immediately. If you replace the tin roof with a tile roof, that will be regarded as capital expenditure and will need to be written off over a number of years.

Legal Costs

Not all legal costs relating to your rental property are tax deductible. Legal costs associated with the purchase of the property are capital and are taken into consideration when calculating your capital gain on sale.

Travel Costs

Since 2017, you can’t claim any deductions for the cost of travel relating to residential rental properties unless you are either:
1. In the business of letting rental properties; or
2. A company.

Checklist of Claimable Expenses

  • Advertising for Tenants
  • Body Corporate Fees and Charges
  • Council Rates
  • Water Charges
  • Land Tax
  • Cleaning
  • Gardening and Lawn Mowing
  • Pest Control
  • Insurance (Building, Contents, Public Liability)
  • Interest
  • Prepaid Expenses (up to 12 months)
  • Property Agent Fees and Commission
  • Repairs and Maintenance
  • Some Legal Expenses
  • Certain Printing & Stationery
  • Software Used to Manage Property Portfolio
  • Depreciation and Building Allowance (Quantity Surveyor Report)

Any further questions, reach out at [email protected]