Rental Property Deductions

What can I claim?
If a taxpayer is earning income from an investment property, they may be able to claim the following expenses against their income:
• Advertising for tenants
• Body corporate fees
• Council rates
• Water charges
• Land tax
• Cleaning
• Gardening
• Pest control
• Insurance
• Interest on property finance
• Capital Allowances and Capital Works (Depreciation)
• Property agents’ fees and commission
• Repairs and maintenance
• Some legal expenses

What is Negative Gearing and how can I use it to my advantage?
Negative gearing occurs where a taxpayer has more rental expenditure than rental income. This may often be the case if there is a large investment property loan balance resulting in a high interest expense or if there is a high amount of depreciation being claimed on the rental property.

If Negative gearing applies, the taxpayer may claim their rental loss against other forms of income such as Wages or Business income assuming their structures and income streams are set up accordingly. In this way the taxpayer not only gets the benefit of a tax advantage, but also has the potential to achieve Capital Growth on their investment property.

Is their anything I can do to maximise my rental property deduction?
If a taxpayer has two or more mortgages, it would be best from a tax perspective to make higher repayments on the mortgage of their Residential premises before making additional repayments on their Rental Property mortgages. The interest of a Rental Mortgage is deductible where the interest on your home’s mortgage is not, therefore we like to maximise our interest deduction by keeping the balance of our Rental Mortgage high.

Another strategy to maximise rental property deductions, especially for newly constructed property, is to have your rental property assessed by a Quantity Surveyor. The Quantity Surveyor will issue you with a report which specifies Capital Allowances and Capital Works deductions that may be claimed each year. Capital Allowances and Capital Works deductions are a type of Depreciation for the Structure of the Building and any Plant & Equipment that may be claimed and can result in a substantial amount of tax saved.

Daniel Trigona – Senior Accountant CPA