Tax Deductible Expenses Checklist
DEDUCTIBLE – Straight Away!
Property management & maintenance expenses
o Advertising for tenants – directly by you or where the agent charged you
o Body corporate fees or Strata Title fees and charges
– Special levies for capital works on a building can only be depreciated at 2.5%
o Gardening/Lawn Mowing
o Pest control
o Security patrol fees
Rates & Taxes
o Water rates, charges & usage
o Council rates
o Land tax – first time owners have to lodge an initial land tax return with the Office of State Revenue in each state – YOU have to initiate this. They will not chase you up but they will charge additional interest for late lodgement
Property Agent Management
o Fees/commissions – including GST
o Postage & petties,
o Statement fees and
o Bank charges/fees
o Lease document expenses
o Letting fees
Administration expenses including
o Stationery used to maintain your rental records etc.
o Postage on documents relating to property management
o Telephone calls relating to property management – ATO prefers to see a diary
o Legal expenses relating to debt collection or tenant problems
o Electricity & gas – where not covered by tenant
o Public liability
On Settlement – from the solicitor’s settlement letter
o Balance of council rates
o Balance of water rates
o Balance of body corporate fees
Repairs & Maintenance
– relating to wear & tear or damage as a result of renting out the property, as opposed to damage in existence at purchase.The expense is an repair when it is being restored. Generally repairs include
ATO is particularly concern about people who are claiming expenses described as repairs when they are considered to be improvements.
Example – fixing broken glass on a window is considered a repair. Replacing the whole window frame is an improvement which can be depreciated at 2.5%
Repairs made immediately after purchase of the investment property or maintenance to make the property suitable for rental are considered to be of a capital nature (initial repair) – form part of the cost of the property and can be depreciated. They are not deductible as ATO considers the lower price of the property reflects its state of disrepair.
Interest & loan a/c fees on loans to finance investment properties.
o For the interest to be deductible the loan must have been applied to acquire an income producing asset e.g. rental property
o Where loans used for both investment property and private assets the interest has to be apportioned based on how much of the principal was used for which purpose.
– This usually happens when people are using a Line of Credit facility
Travel expenses to – (not deductible, unless running a business, or via a company)
o Inspect property
o Maintain property
o Collect rents
A full deduction can only be claimed if the sole purpose of the trip relates to the property.
o Where the inspection is combined with a holiday, expenses must be apportioned, Where you visit an investment property during 1 of 10 days you are in the holiday location ATO says you are only allowed the cost of travel from your accommodation to the rental property and return
Quantity Surveyor’s report showing depreciation expenses and Special Building Write-off
– cost of attending property investment seminars – only to the extent that they relate to operating or maximising the return on currently owned properties
o Where money is spent on relevant seminars before any property is acquired, there will be no deduction available
DEDUCTIBLE – NUMBER of YEARS
o Loan Application fee
o Title search fees
o Lenders mortgage insurance
o Stamp duty on mortgage
o Mortgage registration fees
o Each item cannot be separately deducted for being under $300
NOT DEDUCTIBLE – Capital In Nature
The following items are either not deductible or considered to be of a capital or private nature by ATO
Keep bank statements for 12 months, try to maintain a separate bank account or offset account to pay of rental property expenses from.
Use our rental property expense collation forms to help –
PROPERTY RELATED BLOGS
- Demolishing an old rental property – What are the CGT Implications?
- Capital Gains Tax (CGT) on renting out your principal home?
- Renovations of a Pre 1985 Rental Property – Can CGT be applicable – Yes!
- Property GST – Margin Scheme – Tug of War between sellers & buyers
- Depreciation – Positive or Negative Geared Rental Property?
- Main Residence – 4 Year Rule Exemption of Construction for CGT!
- Do I have to pay tax if I sell the backyard off?
Umbrella Accountants – Property Accountants Brisbane
We can help with –
Ensuring all legal rental property tax deductions are sought and claimed
All rental properties are assessed to ensure any depreciation is claimed.
Prepare any PAYG Variations with the ATO to assist with negative cashflow.