Rental Properties – What can I claim?

Are you investing in property? Do you know what you can and cannot claim in your tax return? Now that tax time is fully underway it’s a great time to review what can be claimed for investment properties. This is a frequent topic with clients, with many not sure what to include.

All the expenses claimed as a deduction must be actually incurred by you the owner, and not paid by the tenant. The main expenses that can be claimed include; cleaning, advertising for tenants, bank charges, body corporate fees (or strata), council rates, electricity and gas, landlord insurance, house and contents insurance, public liability insurance, gardening and lawn mowing, water charges, repairs and maintenance, pest control, property agents fees and commissions, and interest on loans.

Depreciation is also a common deduction and generally can be claimed from a quantity surveyor’s report. This report gives a valuation to all the property’s separate assets, and the main asset – the building. This is often a large deduction and when utilised over many years it can become a very tax effective strategy.

Other expenses that are slightly less common yet can be claimed are legal expenses (excluding acquisition and borrowing costs), the cost of a quantity surveyor’s report, any tax related expenses in relation to the property, travel expenses for inspecting the property or if private rental – travel for collecting rent, and any administrative expenses like telephone calls, postage, and bookkeeping fees.

Common mistakes made include claiming for acquisition and disposal costs. Examples of these are conveyancing costs, stamp duty paid on purchase, and advertising costs. These expenses are not deductible, however they can add back to the cost base for capital gains tax (CGT) purposes.

Keeping good records is essential when investing in property as ownership can be over many years. If you sell an investment property your tax agent will need to see the original purchase documents to calculate the CGT implications. Your tax agent will be able to maximise your deductions when you keep as many receipts and documentation as possible during the life of the property.

If you have an investment property or are looking at investing in property and would like to review what you can claim, call Amy on 02 4648 0431 to discuss further.

Disclaimer – Please note this information is for general use only and does not take into consideration each individuals circumstances. Please see your accountant for specific advice in relation to the above article.