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What Investment Property Costs are Tax Deductible?

Dan Schubert Posted on 28 Jun 2024

What Investment Property Costs are Tax Deductible? 

Hey there! At JKL Real Estate, we know that understanding the tax benefits of your investment property can save you a lot of money. Many landlords aren't fully aware of all the deductions they can claim, so let's break it down and make sure you’re not missing out on any opportunities.

General Rule for Tax Deductions

You can only claim deductions during periods when your property is tenanted or advertised for rent. Keeping all records to prove these business-related expenses is crucial. The Australian Tax Office (ATO) keeps a close eye on property owners, so make sure you keep all receipts and consult with your accountant before making any claims.

Types of Tax-Deductible Expenses

There are two types of tax-deductible expenses for investment properties:

  1. Expenses you can claim in the same income year you incur them.
  2. Expenses you need to claim over several years.

Immediate Deductions

Here’s a quick guide to help you investigate what you may be able to claim right away:

  1. Marketing Costs

    • Expenses for finding tenants, such as advertising your rental property, are deductible in the same year you pay for them.

  2. Loan Interest

    • The interest on your mortgage and any bank fees related to servicing that loan are typically tax deductible in the same financial year. This must be interest on a loan directly related to the investment property.

  3. Council Rates

    • You can claim council rates for the actual number of days the house was rented. These are deductible in the same financial year they are paid.

  4. Body Corporate & Strata Fees

    • The cost of body corporate fees can be claimed. However, if these fees include gardening, you cannot claim these expenses separately.

  5. Repairs and Maintenance

    • Costs for repairs and maintenance are deductible immediately. Note that "repairs & maintenance" differ from replacing an appliance, which is usually claimed as depreciation over its lifespan.

  6. Property Management Fees

    • If you use a property manager, their fees are tax deductible.

Other Tax-Deductible Expenses

You can also claim the following:

  • Electricity and gas (if paid by you)
  • Landlord and building insurance
  • Pest control
  • Garden maintenance
  • Legal expenses related to the property
  • Bank charges related to the property’s income
  • Bookkeeping fees

Depreciation

As an investment property owner, you may claim deductions for the decline in the value of the building's structure and the assets within it. Depreciation can be claimed under two categories:

  1. Capital Works
  2. Plant and Equipment Assets

For a detailed explanation, check out our separate video on depreciation.

Important Reminders

The ATO requires you to keep records of all your expenses. Without proper documentation, your claims may be denied. Always seek professional advice regarding any potential deductions and calculations.

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