When you utilise the tax deductions offered by the ATO to the maximum extent possible, property investment can provide you with a mighty rewarding venture. Understanding these can make a very big difference in your cash flow and profitability.
If you’re a property investor, likely you’ll almost instantly be able to write off several expenses related to property management and maintenance against your rental income via the Australian Taxation Office (ATO):
- Tenant advertising; body corporate and strata title fees; and upkeep costs such as cleaning, gardening, and pest control
Taxes and Rates:
Land tax - (ensure to lodge an initial land tax return with the Office of State Revenue in your state or territory)
- Council and water rates
- Property management fees and other agency charges
Postage, petty expenses, and statement fees.
Administration Expenses:
Property management-related expenses for stationery, phones, and the internet
Legal fees related to tenant disputes or debt collection
Gas and electricity (if not provided by the tenant)
- Insurance premiums paid towards public liability, building, contents, and landlord insurances
- Amounts spent on maintenance and repairs e.g. plumbing, electrical works etc. to keep the property in a liveable state.
Please note: The ATO makes a distinction between renovations (capital expenses) and repairs (deductible). For instance, rebuilding the complete window frame is regarded as an improvement, whereas repairing broken glass is a repair. Speak with your investment savvy accountant for more information on this. If you are looking for an investment savvy accountant, please reach out to us through our website www.propertyba.com.au and we’ll connect you with one.
- Interest paid on investment Loans used to purchase the investment property is deductible. If the loan is mixed-purpose (e.g., part investment, part personal), only the interest related to the investment portion is deductible.
- Fees paid for obtaining a tax depreciation schedule from a qualified quantity surveyor are deductible.
Amount paid for seminars related to operating or maximizing returns on the investment properties you presently own are deductible.
- Acquisition and Disposal Costs like the purchase price, buyer’s agent fees, conveyancing fees, and stamp duty. These are considered capital costs and may be factored into capital gains tax calculations upon sale.
- Expenses not Incurred by you i.e. any costs paid by the tenant or another party.
Initial repairs to rectify issues that existed at the time of property purchase are considered capital expenses.
To maximising your tax benefits and take full advantage of these deductions do the following:
- Keep all receipts, invoices, and documentation for expenses related to your investment property.
Consult with property tax specialists to ensure compliance with ATO regulations and to optimize your tax position.
By understanding and appropriately claiming these deductions, you can enhance the profitability of your investment property and ensure compliance with Australian tax laws.
What’s been the most surprising property expense you’ve claimed as a deduction? Let us know in the comments or email us on info@propertyba.com.au or connect with us on our socials.
Disclaimer:
This information is general in nature as your buyer agent fees may be tax deductible depending on your circumstances. We are not tax professionals. You should speak with your accountant or tax advisor regarding whether you may be able to look for a deduction(s) based on your individual situation and the type of investment you put in. The content mentioned in this article/blog is considered general advice which updates over time and may or may not be reflected in this article/blog. This is not professional advice, please consult with a real professional for better guidance. If you are unsure of who may be able to help you with your query, please reach out to us through our website www.propertyba.com.au and we’ll connect you with someone who can help.