By Ros Burton (Principal – The Real Estate People)
I don’t think there’s too many people out there who enjoy paying tax, so this time of year is always a welcome opportunity for landlords to recoup some of the costs they incur to maintain, manage, and improve their property.
It’s crucial to note that not all expenses are tax-deductible, and the ATO has strict guidelines on what can and cannot be claimed, but here are a couple of important ones to keep in mind.
Mortgage Interest
One of the most significant tax deductions for a rental property in Australia is the interest paid on your mortgage. If you have taken out a loan to purchase your rental property, the interest portion of your mortgage payments can be claimed as a tax deduction. However, it’s important to note that only the interest portion is deductible, not the principal repayments.
Depreciation
Depreciation is another key tax deduction for owners. Depreciation refers to the decrease in value of your property’s assets over time due to wear and tear. The ATO allows property investors to claim depreciation on both the building itself (capital works) and the fixtures and fittings within the property (plant and equipment).
To claim depreciation as a tax deduction, you’ll need to obtain a depreciation schedule from a qualified quantity surveyor. This schedule will outline the depreciation rates for your property’s assets and provide an estimate of the tax deductions you can claim each year.
Property Management Fees
If you engage a property manager to manage your rental property (like us), the fees you pay are generally tax-deductible. Property management fees can include charges for advertising your property, conducting tenant screenings, collecting rent, and liaising with tenants on your behalf.
We’ll provide you evidence of the fees paid via a summary of fees charged throughout the year.
Insurance Premiums
Landlords can claim the cost of insurance premiums for their rental property, including building, contents, and landlord insurance policies.
Council Rates and Taxes
Council rates and taxes are also tax-deductible and include charges such as water rates, sewerage rates, and land taxes levied.
By following these guidelines and avoiding common mistakes, you can confidently navigate the Australian tax landscape and make the most of your rental property investment.
But there are plenty of other claims you can make as well, so always seek professional advice when necessary to ensure you’re maximising your tax benefits and building wealth through property investment.