Residential Rental Property Tax Deductions

Residential Rental Property Tax Deductions

Tax Deductions are available for rental properties for the period that they are rented or are genuinely available for rent. Some common tax deductions against the income of the rental property include:

  • Advertising for tenants
  • Agent commissionsResidential Property Tax Deductions
  • Bank charges
  • Body corporate fees
  • Borrowing costs on loans
  • Capital works tax deductions (building allowance deductions)
  • Cleaning
  • Depreciation on assets
  • Insurance premiums
  • Interest on monies borrowed
  • Land tax
  • Pest control
  • Repairs & maintenance
  • Rates
  • Quantity surveyor report
  • Travel for inspections/repairs
  • Water charges

It is important to distinguish between costs of a capital nature, in which case form part of the CGT calculation on sale, and those of an income nature (as listed above) whereby they can be claimed as a tax deduction against the rental income. Marsh Tincknell Accountants are trusted advisors that can help you determine the best tax outcome on your rental property. If you’re wondering what you can claim, get in touch.

Points of Interest

  • Where a rental property has more than 1 owner, the rental expenses must be apportioned  in accordance with the legal interest in the property.
  • A quantity surveyor is a recognised professional who is able to prepare a depreciation report on a rental property and allocate part of the purchase price towards depreciable assets and also estimate the cost of construction for the purpose of claiming the capital works tax deduction.  Depreciation rates are indicative of the effective life of an asset.  The capital works tax deduction is calculated as 2.5% per year on the original construction cost or subsequent renovations where construction commenced after 17 July 1985.
  • Depreciating assets costing $300 or less may be claimed in full, in the year incurred.  If the rental property is held jointly with others and the cost of your interest in the item is $300 or less, then you can claim it as an immediate tax deduction, even though the full cost of the asset is greater than $300.
  • Where borrowing costs are $100 or less, they may be claimed in the year paid.  Where they exceed $100, the tax deduction is claimed over a 5 year period, or over the life of the loan, if it is shorter than 5 years.
  • Interest expenses need to be apportioned if the loan was only partly used to fund the rental property and partly for another purpose.
  • Adjustments contained in purchase and sale contracts, for rates, body corporate, water charges etc also need to be taken into account.
  • Properties rented at below market value to friends and family will have their tax deductions limited to the amount of rental income.
  • Repairs and maintenance may be claimed where it relates to the wear and tear or damage that occurred as a result of tenants.  A repair is generally a replacement of a part of an item ie a cupboard door, opposed to the replacement of the whole item eg the entire cupboard.
  • An initial repair is not deductible and may be considered to be a capital item.  These include repairs to bring the property up to a rentable standard or to rectify problems which existed on purchase.

Contact Marsh Tincknell Accountants for the best advice for your situation. We understand that sometimes there doesn’t seem to be a clear cut answer to what you can deduct – we’re here to make it clear and easy – for your financial success and freedom of choice.

Did you know that even garden gnomes can sometimes be deductible for rental properties? ...What Deductions are you missing out on?

Talk to the experts at Marsh Tincknell Accountants and see what you could be missing out on today. It all makes a difference, and we understand that.
Further information may be obtained from the Australian Tax Office “Guide for Rental Property Owners” available here: http://www.ato.gov.au/Individuals/Tax-return/2016/In-detail/Publications/Rental-properties-2016/