Are you relatively new to property investment and not quite sure of what you can and cannot claim? If the answer is yes, don’t worry – you are not alone.
As a new property investor, it is worth speaking to a professional tax accountant to get a good understanding of what you can and cannot claim. After all, you don’t want to miss certain tax deductions simply because you didn’t know they were available to you.
As a property investor, you are eligible for a range of specialised tax breaks – concessions that others may not be entitled to.
Some of the more common expenses that you can claim include:
- Cleaning and gardening costs
- General repairs and maintenance
- Travel to and from the rental property (within reason)
- Advertising for tenants
- Real estate management fees
- Council and water rates
- Electricity and gas
- Insurance including building and contents
- Interest on your investment loan
- Land tax
You can also claim the cost of household items that your tenants have access to, including white goods, furniture and air conditioners. It is important to note that the full cost of each item cannot be claimed, as these items are subject to depreciation. In other words, the relevant deductions have to be claimed over a period of years based on the useful life of the item in question.
But while there is clearly a range of expenses that you are able to claim, there is also a plethora of things you either cannot claim or that cannot be claimed in the traditional sense.
Take, for example, building and construction expenses. While these are not, traditionally speaking, tax deductible, they can be claimed under the special building write-off rule.
Broadly speaking, if the rental property was built after 15 September 1987, you can claim the portion of construction expenses that remained unclaimed at the date you acquired the property.
This cost can be written off at 2.5 per cent each year over 40 years. But you have to know the value of the construction work and when it was carried out. You can ask the previous owner to supply the costs, or engage a suitably qualified expert, such as a quantity surveyor, to provide an estimate. In the case of a new dwelling, the builder or a quantity surveyor should be able to provide you with the relevant cost details.
Other outgoings or expenses that cannot be claimed include any stamp duty paid on the property, the valuer’s fees on acquisition, advertising costs on the sale and legal expenses that are generated during the purchase and sale of the property. But while these costs are not tax deductible, they can all form part of the cost base of a property if subsequently sold, for capital gains tax purposes.
With so much to consider, preparing your tax return as a property investor can seem a touch overwhelming. So this tax time, it may just pay to speak with a professional.
Bob Korver is the owner of the Mortgage Choice Eight Mile Plains franchise in Queensland. He has more than 20 years’ experience in financial services, having held various senior positions at one of Australia’s major banks before joining Mortgage Choice in 2011.
With a Certificate IV in Financial Services and a Diploma of Finance and Mortgage Broking Management, Bob is well equipped to help his customers with a wide range of enquiries, including business lending, commercial property finance, equipment finance, car loans, personal loans and home loans.
Traditionally known for providing customers with expert home loan advice, today Mortgage Choice in Eight Mile Plains is well equipped to help customers with more than their home loan needs. The franchise can also help customers with their broader financial needs, including but not limited to, commercial loans, personal loans, business lending, equipment finance and even car loans.