As a Landlord Astute Realty Clients may be entitled to a range of tax deductions which can help increase your tax return and provide you a greater return on your investment.
As rent received forms part of your income, you are entitled to claim legitimate expenses in the pursuit of earning that income. This can include such things as Building and Landlord Insurance, Advertising, Body Corporate Fees and Garden maintenance. You can claim a deduction for the period that your rental property is rented or when genuinely available for rent. To prove that the property is genuinely available, there should be evidence of advertising the property and that the property is livable. Some expenses are claimed against the current year where the expenditure occurs and other forms of deductions, like borrowing expenses, depreciation and capital works expenditure can be deducted over a number of years. Note that borrowing costs do not include costs where you have borrowed against the equity in the property for personal use.
What you can’t claim:
- The cost of purchasing or selling the property such as advertising the property for sale, conveyancing costs or stamp duty.
- GST credits for anything you purchase to lease the property as GST does not apply to residential rental properties. However, if you have paid for a service that includes GST then you can claim the whole amount as a deduction inclusive of GST if applicable.
- Any expenses that have not been paid by you – eg. Water or Electricity charges that are passed on to the Tenant.
- Expenses relating to your personal use of the Property.
What you can claim:
- Real Estate Management Fees
- Interest on your loan
- Travel expenses to view/inspect the Property – note that the deduction must be wholly attributable to the property inspection. Technically if this is combined with a holiday – then the amount should be apportioned.
- Security monitoring costs
- Body Corporate Fees including admin levies and general purpose sinking funds
- Depreciation on included whitegoods like air-conditioners; dishwashers, etc.*
- Repairs and maintenance so long as this is not repairs to issues that were pre-existing at the time of purchase – these are considered to be capital costs.***The ATO puts out a tax depreciation schedule annually to identify the allowable tax depreciation on rental accommodation. https://www.ato.gov.au/uploadedfiles/content/mei/downloads/rental-properties-2016.pdf *
*Ask for detailed invoices from Tradespeople and Contractors that specifically state what work has been undertaken as this will help with evidence of whether the work is a repair or an improvement.If you rent to family or friends at a rate that is less than rental market value then this may have an impact on the amount of deductions that you can claim.If your property is only rented for a portion of the financial year, or you only rent out a portion of the property – then you will need to apportion your expenses to determine the amount you can deduct.Remember – always keep detailed records of all expenditure from the very beginning of purchasing a property that you intend to rent out.
No person should rely on the contents of this article without first obtaining advice from a qualified professional person.