Investors what tax deductions can you claim as A landlord - Guest Blogger Megan Taylor.
Updated: Jul 6, 2018
Tax can be complicated. As an accountant, we assist our clients to navigate through the complexities of the Australian Taxation System on a day-to-day basis and the most common questions that we get asked begin with the words “Can I claim…”. When someone adds to their investment portfolio by purchasing a rental property the “Can I claim…” question is “What expenses can I claim against my rental income that I’m receiving?”
Firstly, a little rule of thumb for you – to enable you to claim any expenditure, your property must be genuinely available for rent. So, is your property actively being advertised with a reasonable likelihood that it will be tenanted out?
If the answer is yes, then read on!
The best place to start is with the basics. These are the expenses that are paid in relation to the ongoing ownership and maintenance of your property and include:
* Local council rates
* Water rates
* Building and landlord insurance premiums
* Interest on the property’s mortgage
* Bank fees on loans and bank accounts for the rental property
* Lawn and garden maintenance
* Pest control
* Property management fees
* Advertising for tenants
* Repairs and maintenance
* Accounting fees
* Accounting software used to maintain property income and expense records
* Depreciation and Capital Works Deductions
HOT TIP! Be sure to request an annual statement from your property manager summarising your total rental income and management fees as well as any other expenses that have been deducted from your rent during the financial year. This will save you some time with gathering together your information.
But Investor beware! There is a bit of fine print in relation to the above which should be considered (because I can’t write a blog without getting all accountant on you).
Fine print – Repairs & Maintenance Vs Improvements
The Australian Taxation Office considers repairs and maintenance to involve replacement or renewal of a worn out or broken part or preventing/fixing deterioration. To give you an idea of what would be considered repairs and maintenance, a few examples include painting (either interior/exterior), fixing leaking taps and replacing part of your guttering. On the flip side, replacing an entire kitchen or bathroom may not be considered repairs and maintenance and, instead, would be labelled as improvements. However, a deduction each year for a portion of your improvements (this will be either Depreciation or a Capital Works Deduction) may also be available to you. If you are uncertain about the differentiation between repairs and maintenance vs capital, or whether your expenditure will be fully deductible in one year, please contact your advisor for clarification.
HOT TIP! Keep all receipts and invoices in relation to all expenditure, particularly those relating to repairs and improvements. This will assist your advisor in determining what is 100% claimable and what isn’t.
What are some key points for property owners for tax time?
* Be organised – retain all of your documentation in once place so that it’s easy enough to access each year. If you aren’t sure whether or not something is deductible, keep a copy anyway and discuss it with your advisor.
* Talk to your accountant BEFORE undertaking significant expenditure on your property – its important that you make yourself aware of what the tax benefits will be prior to you spending the dollars.
* Take the time to understand what you can and can not claim in relation to property ownership. Hopefully this article addresses some part of that but be sure to seek further advice from your advisor.
Disclaimer: this information is of a general nature only and doesn’t take your specific needs or circumstances into consideration. For more specific advice on your own personal situation, please contact your accountant or advisor.