Many investment property owners fail to claim all allowable tax deductions because they are unaware of what they can claim.
Regardless of the property investment strategy you adopt (positively or negatively geared) there are benefits in claiming all possible deductions.
Tax time is just around the corner so review the list of possible deductions below and get your receipts ready!
Initial borrowing expenses
- stamp duty charged on the mortgage
- loan establishment fees
- title search fees charged by your lender
- costs for preparing and filing mortgage documents
- mortgage broker fees
- fees for a valuation required for loan approval
- lender’s mortgage insurance – this is insurance taken out by the lender and billed to you
Interest
Interest is usually the largest tax deduction, particularly in a negative gearing arrangement. You can claim the interest charged on the loan used to:
- purchase a rental property or land to build a rental property
- purchase a depreciating asset for the rental property (eg an air conditioner)
- make repairs to the rental property
- finance renovations on the rental property
Other expenses
- advertising for tenants
- bank charges
- body corporate fees
- council rates
- gardening and lawn mowing
- insurance
- land tax
- legal expenses for preparing a lease or evicting a non-paying tenant
- pest control
- property agent fees or commissions
- repairs and maintenance
- water charges (if not paid by the tenant)
Capital works
You may be able to claim a deduction (usually at the rate of 2.5% per year in the 40 years following construction) for the construction cost of:
- buildings
- structural extensions such as a garage or patio
- structural alterations such as adding an internal wall
- structural improvements such as a gazebo, carport, sealed driveway, retaining wall or fence
Depreciation
The plant and appliances in your property reduce in value over time as a result of normal wear and tear. The ATO allows you to claim deductions for this reduction in value each year.
In order to substantiate these deductions you should consider getting a professional quantity surveyor’s report for applicable capital works and depreciation deductions during the life of your property.
Don’t forget to keep your receipts, no receipt = no deduction!
If you would like to chat about your investment property, financial situation or possibly buying an investment property in the future using the equity in your home contact us today. More information about maximising tax deductions on your investment property.