Property investors are entitled to a number of tax deductions to optimise their returns while ensuring compliance with Australian tax laws. In this article, we go over some key tax deductions that may be available to investors during tax time. This is not a comprehensive list, so we encourage you to seek professional assistance before taking action.
Loan Interest:
One of the most significant and consistent deductions is the interest paid on loans used to finance the investment property. Keep in mind that it is for the interest on the loan only, not for any principal repayments.
Depreciation of Assets:
The wear and tear of both the building structure and its fixture and fittings can be claimed as a depreciation expense. A comprehensive depreciation schedule prepared by a qualified quantity surveyor is definitely worthwhile to see exactly how much can be saved.
Repairs and Maintenance:
Expenses incurred for repairs and maintenance of your investment can be claimed as tax deductions. It includes costs related to cleaning, gardening, pest control and even to fix a broken pipe. Note that while repairs are deductible, capital improvements (which enhance the property’s value or extend its useful life) are not immediately deductible but can be claimed over time through depreciation.
Property Management Fees:
The fees incurred from engaging the services of a property manager or agent to handle your investment property are deductible expenses. This deduction includes costs for advertising, tenant selection, rent collection, and property inspections. Legal, accounting, and other admin costs may be claimed as well.
Rates and Taxes:
Council rates, water rates, land taxes, and other local government charges related to your investment property are generally tax deductible for the period the property is occupied by a tenant. Additionally, don’t forget about the strata fees if your property is part of a body corporate.
Insurance Premiums:
Premiums paid for insurance policies related to your investment property, such as landlord insurance that covers the loss of rental income or building insurance that covers the structure itself, can be claimed as deductions.
Travel Expenses:
Travel expenses can be tricky, but deductions may still be available in certain circumstances like using transport to inspect, maintain, or collect rent for your rental property. It’s advisable to consult with a tax professional to determine the specific conditions and limitations surrounding travel expense deductions.
Conclusion:
Remember to maintain detailed and accurate records of all expenses and seek advice from qualified tax professionals who are knowledgeable about Australian property investment taxation. With careful planning and attention to detail, you can make the most of the upcoming financial year-end and set yourself up for success.
Any advice provided is general in nature and should be considered in line with your financial situation, needs and objectives.
