Rental Property Tax Deductions

Rental Property Tax Deductions


Knowing all the available rental property tax deductions if you own or are planning on owning an investment property is vital. Most property investors know some rental property tax deductions but many aren’t aware of all the deductions that the ATO allows. It’s also a good idea to use an accountant who specialises in investment properties.

Let’s look at the rental property deductions most people claim, the traps that some people fall into (with the ATO waiting at the bottom) and the big deduction many people forget to claim.

The rental property deductions most people claim:

  • Interest payments
  • Advertising for tenants
  • Council Rates
  • Water Charges
  • Land Tax
  • Cleaning
  • Gardening and lawn mowing
  • Pest control
  • Insurance (building, contents, public liability)
  • Property manager fees and commissions

Tax Deduction Traps:

Travel is No Longer a Rental Property Tax Deduction

. Not that long ago, if you bought an investment property interstate or a distance from your home you could claim a tax deduction for travelling to inspect your property. As of the 2017 Budget you can no longer claim travel to inspect your property as a tax deduction. This is likely a consequence of too many people with rental properties on The Gold Coast going up there for a week’s holiday and driving past their rental property and claiming the trip as a tax deduction.

Claiming repairs as a rental property tax deduction can be tricky.

The damage you are repairing must have occurred while you were renting out the property. You can’t by a property with existing damage, fix the damage so you can rent out the property, and then claim the cost of fixing that damage as a repair. Be careful, because the ATO are onto this one.

Be careful also about how you claim Special Levies.

It is not uncommon for owners in apartments to be hit with Special Levies to do work that exceeds the cost of funds available in the Sinking Fund. A roof might need to be replaced, or the building painted. Perhaps ‘concrete cancer’ has appeared. Maybe the pool has sprung a leak. Or the owners want to install a pool. The purpose of the Special Levy dictates how it is claimed. If the owners want to install a pool or a BBQ area, that is an ‘improvement’ and you need to claim or depreciate your contribution at 2.5%. If the building needs repainting and you have been renting out your property for a long time, your accountant will likely let you claim your contribution as a repair i.e. a deduction. But if you bought the property recently, the paint did not deteriorate while you were renting out your property so you are improving it. That means you claim your Special Levy contribution at 2.5%.

The rental property deduction many people forget to claim:

Depreciation is often the biggest of all rental property tax deduction, but it’s the one that many people don’t claim. It’s not just first time investors or those doing their own tax returns who miss out either. Some experienced property investors with older rental properties often think depreciation tax deductions won’t be worthwhile. In some cases that’s true, in many cases it isn’t. Even some accountants don’t realise the depreciation opportunities available in older properties.

Finding out if there’s worthwhile depreciation tax deductions available for your property costs nothing; it also takes just a few minutes. Call us on 1300 660033 and we can tell you how much depreciation there will be to claim on your property.

There were some rule changes around depreciation in 2017. Check out our page on Deferred Depreciation to find out more.

What if you haven’t been claiming all your Rental Property Tax Deductions?

What if you’ve had a rental property for a few years and find out you haven’t been claiming all the rental property tax deductions you could have? All is not lost. Talk to your accountant and they can normally amend 2 years of tax returns without too much fuss. In some cases it may be possible to go back further. We can easily cater for these scenarios.

As a company that specialises depreciation tax deductions we hear from investors daily who have been keeping the ATO happy by not claiming all their available rental property tax deductions. Don’t be one of them.

Want to learn more about Depreciation or get a free assessment for your investment property? Just call us on 1300 66 00 33.

It’s always wise to seek the advice of a qualified accountant who specialises in this area. Rules can change from time to time with little notice from the ATO.

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