According to the ATO there are around 1.9 million
property investors in Australia and 2.7 million rental investment
properties. Surprisingly, many landlords fail to claim all
allowable tax deductions simply because they are unaware of all the
expenses they can claim as a tax deduction.
There are two types of investment property strategies positively
geared or negatively geared.
Positively geared properties – where rental income is
higher than interest payments and tax deductible outgoings. Tax is
likely to be paid on the net income.
Negatively geared properties – where rental income is less
than interest payments and tax deductible outgoings. The loss can
be o? set against other income earnings, reducing assessable income
and therefore your tax payable.
The strategy most suited to you will be dependent on your
individual circumstances and your long term investment goals and
More recently, proposed tax changes to negative gearing has been
a political hot potato. Let's face it – nobody likes the
goal posts shifted half way through the match! Whatever the
outcome, property investment is likely to continue being a popular
path to wealth creation for Australians – even if the scales
tip in favour of positively geared property investment.
So... If you have an investment property are you sure you are
claiming all possible deductions?
Regardless of the property investment strategy you adopt all
investors will see benefi ts in claiming all possible deductions.
As a starting point review the lists below and ensure you have
paperwork for the expenses you have incurred.
Initial borrowing expenses
Stamp duty charged on the mortgage
Loan establishment fees
Title search fees charged by your lender
Costs for preparing and fi ling mortgage documents
Mortgage broker fees
Fees for a valuation required for loan approval
Lender's mortgage insurance – this is insurance taken
out by the lender and billed to you
Interest is usually the largest tax deduction, particularly in
a negative gearing arrangement. You can claim the interest charged
on the loan used to:
Purchase a rental property or land to build a rental
Purchase a depreciating asset for the rental property (eg an
Make repairs to the rental property
Finance renovations on the rental property
Advertising for tenants
Body corporate fees
Gardening and lawn mowing
Legal expenses for preparing a lease or evicting a non-paying
Property agent fees or commissions
Repairs and maintenance
Water charges (if not paid by the tenant)
You may be able to claim a deduction (usually at the rate of
2.5% per year in the 40 years following construction) for the
construction cost of:
structural extensions such as a garage or patio
structural alterations such as adding an internal wall
structural improvements such as a gazebo, carport, sealed
driveway, retaining wall or fence
The plant and appliances in your property reduce in value over
time as a result of normal wear and tear. The ATO allows you to
claim deductions for this reduction in value each year.
In order to substantiate these deductions you should consider
getting a professional quantity surveyor's report for
applicable capital works and depreciation deductions during the
life of your property.
Most importantly... make sure you keep all receipts as no
receipt = no deduction.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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