Tax Checklist For Property Investors

Most if not all of the Pillar community own at least one investment property. We are always encouraging our clients to find a ‘creative’ accountant in order to maximise their tax benefits. This doesn’t mean find someone who’s ‘questionable of reputation’, it simply means to work with an accountant who knows what and where to look in order to squeeze every dollar from the ATO.

Being a landlord offers many different ways to minimise the annual tax bill. Doing it right can mean the difference between getting by with one investment property and building an investment portfolio.

The following will help you prepare for your meeting with your accountant and give some insights into what you can and can’t claim as a property investor.

  • Rental advertising costs – If you’ve had to advertise in any way to find a new tenant, be it digital, print, brochures or signs, you can claim the expense against your income (in the same year that you paid for them).
  • Interest on your loan – The interest charged on a loan for investment purposes along with bank fees for servicing that loan are claimable. It’s important to note you can only claim the interest, not any money paid against the principle (hence why most investors choose interest only loans). In addition, you can’t claim any part of a loan that’s been used for personal or private purposes.
  • Council rates – Rates can be claimed in the year they are paid but only if the property was tenanted during this time.
  • Land tax – In some instances you can use land tax as a deduction. Be careful as levies differ state to state. Consult a tax adviser to ensure you are claiming the right amount.
  • Strata – If your investment property is on a strata title (i.e. townhouse, apartment or otherwise shared common land or walls) you can claim the body corporate fees.
  • Repairs and maintenance – If you have made a repair after damage from say, a storm or heavy rain, the costs of repairing the item or appliance can be an immediate deduction. If on the other hand you end up replacing an appliance, this becomes a depreciable deduction. There’s also things like replacing tiles or carpets, fittings or an old fence. In this instance, it’s considered capital works which is usually depreciated at 2.5% over many years.
  • Appliances – Just like the building, things like dishwasher, oven, air conditioner, etc. also offer deductions on depreciation (with older appliances, they would have to have been installed prior to July 2017 provided the property was bought before May of that same year).
  • Insurance – Most of the cost of insuring a rental property can be claimed.
  • Agent fees – Commissions and fees paid to agents, including property managers, are deductable.
  • Building – If your property was built prior to September 1987, you won’t be able to claim depreciation. Anything built after that offers a depreciation deduction of 2.5% a year for 40 years. Renovations are also limited to work done post February 1992.
  • Bookkeeping – any fees paid for the purpose of bookkeeping (as it relates to your investment property, not your personal taxes) can be claimed.
  • Travel – Unless you are a professional property investor (i.e. do it as a business), travel expenses relating to an investment property (to inspect or perform maintenance for instance) are no longer deductable.
  • Legal expenses – Legal advice, documentation, evictions, all offer tax deductions.
  • Rent vs expenses – At present, if an investment property is bringing in less rental than its expenses, the owner can deduct this loss from their taxable income.
  • Garden maintenance – This can be claimed as a deduction.
  • Capital gains tax – Most investors understand that if they make a profit on the sale of an investment property, they will need to pay tax. If the property was purchased and sold within a 12-month period, the gain is added to the investor’s income tax for that year. This usually results in a higher amount of tax paid. However, if the property is owned for more than 12 months, capital gains attracts a discount of 50%.

Please use the above information as a guide only. Ensure you seek professional advice in relation to your particular circumstances.

Originally published on realestate.com.au as “Investment property tax deductions: what you do not want to miss out on”.

Things you should know:

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances before acting.