Property

Guide to Tax Deductions on Investment Properties in Australia – Forbes Advisor Australia

Investors can incur a range of costs related to the management and upkeep of their investment property across any given financial year. You can claim the following costs as tax deductions for the portion of time that the property has been rented out (or as long as it has been available for rent in some cases).

Property management and maintenance

This includes everything from costs involved in advertising the property for rent through to cleaning, gardening, and pest control, or strata fees if your property is part of a body corporate (be sure not to claim maintenance fees twice if this is covered by strata). If there are any utilities not paid by your tenants as part of the leasing agreement – as is often the case with water supply – these are also claimable.

Property agent fees

If a property agent manages the needs of your investment home and its tenants, their fee is claimable as a tax deduction. This may also include advertising costs if you arrange this through the agent.

Legal, accounting, and other admin costs

There are aspects of investment property management which may require guidance from professionals such as lawyers and accountants. Happily, what they charge is deductible on your return.

If you’re sorting out various admin tasks at home, you can claim the usage of personal equipment like your phone, internet plan, and even stationery on tax. But be sure to only claim the portion of those costs associated with the management of your investment property.

Interest on your home loan

Depending on the size of your mortgage and its home loan interest rate, this could be the most significant tax dedication for an investment property owner. To be able to claim mortgage interest payments on tax, you’ll need to have purchased the property with the intent to rent it out as an income-earning asset, meaning you’re paying down an investment home loan.

Some buyers may purchase a property as both an owner occupier and an investor, with a plan to rent out part of the property if it has a granny flat on site or a spare room. In this case, deductions for interest payments must reflect the income-earning portion of the property. This can get a little complicated if you’re sharing the space with a roommate, so it’s advisable to seek advice from qualified experts.

Council rates and land tax

Land tax, council rates, and water rates (including charges and usage) are all claimable on tax so long as your investment property is rented out. If there’s a period of the year where the building wasn’t occupied, then you can’t deduct taxes and rates for this timeframe. When it comes to land tax, be sure to check the specific requirements of the state or territory you live in, as deduction rules and timing for when to claim on costs varies.

Repairs that maintain the property

Repairs around the property can be immediately deductible, but they must be distinct from any improvements or renovations which could be seen to increase the value of your home. For example, repairing a leaking ceiling is immediately deductible, but retiling the entire roof for aesthetic appeal isn’t.

Insurance

It’s advisable to take out home insurance that covers the structure of your home as soon as you make a property purchase, so you’re financially protected in case an unforeseeable event damages your home. This is claimable on tax for investment property owners, including a more specialised policy type called ‘landlord insurance’. This home insurance variation covers owners for additional potential costs like loss of rental income in certain circumstances and damages caused intentionally by tenants.

Investment property management education

If you’d like to take an educational seminar or course on managing an investment property, this can be tax deductible. However, you must already own an investment property for this to be claimable.

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