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Disclaimer

This is not advice. Items herein are general comments only and do not constitute or convey advice per se. The information contained in these articles is for guidance only and should not be relied upon without obtaining professional advice having regard to your direct circumstances.

 

Taxation Guide to Property

The ATO offers many different types of deductions and incentives to property investors. So, to get the most out of your investment it’s important to know exactly what you can and cannot claim in your tax return.

All income from rent is assessable in the hands of a taxpayer who is legal owner of the property. Rental income includes the full amount of rent money you earn when you rent out your property, as well as rental bond money kept in place of rent or because of damage to the property, or any insurance payout received for lost rent.

If you are a part owner of the property, you need only include your share of the rent and expenses on your tax return.

There may also be situations when you need to apportion your expenses for the property. These include:

- if you use your property for both private and income-producing purposes , such as holiday homes or time-share units;
- if only part of your property is used to earn rent; or
- if you rent out your property at less than normal commercial rates. 

What you can claim

You may be able to claim a deduction in the year you incur the expense for the following rental expenses:

- advertising for tenants
- body corporate fees
- property agent’s fees and commission
- council and water rates
- interest on loans – loans can be taken out to purchase the rental property, to purchase depreciating assets, or to pay for renovations and repairs.
- landlord and public liability insurance
- repairs and maintenance fees on the property, including gardening
- land tax
- quantity surveyor’s fees
- mortgage discharge expenses
- bookkeeping and secretarial fees
- travel and car expenses related to rent collection, inspection of property and maintenance of property
- lease costs – preparation, registration, and stamp duty
- security fees
- in-house audio/video service charges
- telephone calls
- GST – only applies to commercial properties and if you are registered for GST

There are also some expenses that may be claimed over a number of years. These include:

- the building costs write-off (not the purchase price)
- improvements, such as renovations, extensions or alterations – added to the capital cost of the property and claimed under the Capital Works deduction
- replacement of items that cost more than $300 each – depreciated over a number of years
- borrowing expenses – for stamp duty on the mortgage and any legal expenses on the loan, not for stamp duty or legal expenses on the actual purchase of the property

Expenses you are not able to claim include:

- Costs of acquiring and disposing of your rental property, for example the purchase price of the property, conveyancing costs and stamp duty on the transfer of the property.
- Expenses not actually incurred by you, such as water or other charges paid by your tenants
- Expenses that are not related to the income-producing portion of the property, in the cases of part-property rental or part-year rental of holiday homes.

Remember to keep all receipts and records of expenses related to the rental property to get the most out of your investment.

 


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