The rental property tax deduction means that investors can offset any losses on an investment property against their assessable income. It is important for landlords to be aware of the rental property tax deductions they are eligible to claim for compliance purposes and to boost their cash flow.
Investment loan interest
Owners of income-producing properties can claim interest on an investment loan as a tax deduction. They may also claim other borrowing costs such as loan establishment fees, mortgage broker fees, existing loan fees, Lender’s Mortgage Insurance (LMI), and mortgage document preparation costs.
On the other hand, you cannot claim payments made on the principal amount of the loan. Also, you cannot claim if you have used part of the loan for personal purposes and you must apportion any interest repayment deductions.
Property depreciation
Depreciation is a non-cash deduction. This can be claimed until the property is genuinely available for rent.
Capital works deductions (Division 43) can be claimed on the structure of the building and assets permanently fixed to the property. Depreciation of plant and equipment (Division 40) may be claimed on easily removable assets of a property or mechanical nature.
Land tax and council rates
The body corporation fees and council rates relating to your investment property are claimable costs.
Property management and real estate advertising costs
Property management and real estate advertising costs associated with investment properties are tax deductible.
Insurance
Insurance for buildings, contents, landlord, and public liability is also tax deductible.
Repairs and maintenance
Repairs, maintenance, and capital improvements can result in significant deductions. Your accountant will help you claim these deductions correctly.
Audit Risk
If you have a rental property you must keep all receipts. This is an ATO audit hotspot. We also recommend that you have audit insurance in place.
