Please note that there have been amendments to law since this blog was posted, please refer to our blog Changes to Rental Property Deductions posted 29/11/17 for more information.
There are many common deductions that property owners are aware of, but here are a few of the less known rental deductions.
Special body corporate levies & contributions to strata sinking fund
Strata bodies sometimes charge additional amounts on top of the standard fees in order to pay for certain common area expenditure. These may be deductible, depending on the purpose of the levies.
Lenders mortgage insurance
Mortgage insurance is often required by banks where an investor has low equity in a property. The cost of the insurance is deductible over five years.
Package fees on borrowings
Lenders will often slug you with annual bank charges that are deductible in addition to the interest you are also paying.
Travel & airfares
Travel (especially airfares) comes under close attention by the Australian Taxation Office, but is a valid claim if the trip has the sole purpose of inspecting or repairing a property. If the travel also has a purpose outside of visiting the rental, you should keep a diary of events, and apportion some of the costs.
Phone cost and internet usage
A portion of your phone & internet may be deductible if you find yourself using both services in order to manage and maintain the property.
Lender’s allow you to prepay interest on your loan. This can be an effective tool in reducing tax in high income years. Note that the most you can deduct is up to 12 months of prepaid interest.
Depreciation & capital works
Sole owners of property can claim capital expenditure items (new assets like fridges & dishwashers) outright if they cost less than $300. Where property is jointly owned, this doubles to $600 per item. If the property is relatively new, has some sizable renovations or is filled with furniture and appliances you paid for yourself it might be advantageous to have a professional depreciation report prepared.
Many small business owners would be aware that they can claim assets costing up to $20,000 outright in the year that they purchase them. But many wouldn’t know that this deduction extends to assets they purchase for work related purposes or investment assets. So if you are a small business owner who also has a rental property, you may be entitled to these generous tax concessions for assets you acquire for your property.
Author: Nick Vincent