It’s coming up to that time of year again; The current financial year ends on 30 June, so now is the time to start making yourself tax ready.

There are costs you will incur to run your investment property, and like any business, you can offset these costs against any tax you may incur on your earnings.

This list is not complete and there may be some more expenses you can claim against your tax. Likewise, in some circumstances, some expenses may not be eligible tax deductions. We always recommend you seek the advice of a financial specialist and/or with the ATO when filing your tax return.

What you can claim for

1. Property Management

Generally, any expenses related to managing and running your property can be claimed for. This list is not complete, but it may include expenses such as:

• Advertising for tenants (whether it’s directly paid by you or charged by the real estate agent)
• Body corporate fees
• Strata Title fees and charges
• Pest control
• Security patrol fees
• Fees and commissions (including GST)
• Postage, stationery, phone and internet usage if related to your property
• Lease document expenses
• Letting fees
• Legal expenses relating to debt collection or tenant problems

2. Maintenance and repairs

Repairs and maintenance can be claimed in full if they are directly related to wear and tear. According to the Australian Taxation Office (ATO), repairs are considered work completed to fix damage or deterioration of a property, such as replacing part of a damaged fence.

For instance, repairing a window pane can probably be claimed in full, but replacing the entire frame may be classed as capital works.

Costs which you may be able to claim against include:

• Cleaning
• Gardening and lawn mowing
• Pool maintenance
• Plumbing (eg leaky tap)
• Electrical (eg changing light globes)
• Handyman fees (eg fixing doors)
• Safety regulation checks (eg smoke alarms)

3. Rates, utilities and taxes 

• Water rates, charges & usage
• Electricity and gas (where the tenant isn’t responsible for covering these expenses)
• Council rates
• Land tax [first-time owners must lodge an initial land tax return with the Office of State Revenue in each state or territory]

4. Related Insurances

• Landlords
• Building
• Contents (where applicable)
• Public liability

5. Interest on the property loan

If you have had to take out a loan to finance the investment property, this will probably be the most significant tax deduction you can claim.

Some property owners may have used one loan to purchase both their investment property and another asset. In which case, the interest must be apportioned based on how much of the principal was used for which purpose.

6. Depreciation

As a building gets older, its structure and the assets contained within it wear out ie they depreciate.

There are two different types of depreciation:

• Capital works (division 43) deductions for the wear and tear to a building’s structure and items permanently fixed to the property. For example, built-in kitchen cupboards, clothes lines, and fences.
• Plant and equipment depreciation (division 40) on items which are easily removable or mechanical in nature. For example, air-conditioning units, security systems and light fittings.

Ideally, you should employ a depreciation specialist to visit the property when you purchase the property and they can work out a tax depreciation schedule to give to your accountant.

What you can’t claim for

You may not be able to claim a deduction for some residential rental property expenses such as a number of borrowing expenses, the loan principal, and the decline in value of some assets.

For more details, and advice on what expenses you can’t claim for, visit the ATO website.

We’re always here for an informal chat to answer questions; with over 45 years in the business, we know how property investment works, and have the experience to help you get the best from your asset.

Find out more about our property management services, and what we can do for you by ringing 02 4956 9777, or send us an email to mail@newcastlepropertymanagement.com.au. You can also see us at our Cardiff office.