Top 15 Tax Deductions for Investment Properties in Australia

Top 15 Tax Deductions for Investment Properties in Australia

• Posted By Katrina Gaviola

As a property investor, you may face numerous unexpected bills each month. However, tax breaks for investment properties can significantly bolster your financial returns.

Having been an investment property owner for many years, I've encountered nearly every property expense imaginable.

From malfunctioning hot water systems to broken air conditioning units and unexpected repairs not covered by insurance, I've seen it all.

 

Buying quality property in the right location can help grow your wealth, and tax breaks for investment properties serve as an extra incentive, reducing your tax liabilities. Many expenses involved in owning a rental property can be deducted against your regular income, lowering your overall tax and increasing your cash flow.

 

Benefits of Tax Deductions

Leveraging property investment tax deductions can enhance your success and position you to grow your property portfolio in the future. While tax deductions shouldn’t be the primary reason to buy an investment property, they are certainly a welcome bonus.

 

Deductible Expenses for Property Investors

Here’s a comprehensive list of top property investment tax deductions in Australia:

 

 

1. Advertising and Marketing for New Tenants

   • Costs for marketing your property, such as online ads, print media, brochures, and signs, are fully deductible in the year they are paid.

   Example:
   James, who owns a two-bedroom apartment, spent $1,100 on advertising to find new tenants. This amount is fully tax-deductible.

2. Loan Interest and Bank Fees

   • While principal repayments aren't deductible, the interest accrued on loan repayments is.

3. Body Corporate Fees and Charges

   • If your property is on a strata title, body corporate fees including common area maintenance and insurance are deductible.

4. Insurance

   • Costs for building, contents, landlord, and public liability insurance are claimable.

5. Council Rates

   • Deductible during the rental periods.

   Example:
   Lucy can claim council rates for the 219 days her investment property was rented last year.

6. Property Management Fees

   • Fees for property management, including valuations and inspections, are tax-deductible.

   Example:
   Emily pays 8% of her rental income in management fees, which are fully deductible.

7. Depreciation

   • Depreciation on assets like flooring, carpets, appliances, and furniture is claimable.

8. Negative Gearing

   • Financial losses due to costs exceeding rental income can be deducted.

9. Gardening Expenses

   • The upkeep and replacement of plants and structures are deductible, but not improvements.

10. Land Tax

    • Claimable if the property is rented out.

11. Utility Fees

    • Basic costs for electricity, gas, or water supply not paid by the tenant are deductible.

12. Pest Control

    • Professional pest control costs are tax-deductible.

13. Repairs and Maintenance

    • Such costs are deductible in the same year they occur.

Example:
Jane and Robert spent $2,700 on repairs, which is fully deductible.

14. Legal Costs and Lease Document Preparation

    • Legal fees related to tenancy issues are deductible.

15. Capital Gains Discount

    • Selling your property after more than a year qualifies you for a 50% capital gains discount.

 

Non-Deductible Expenses

• Stamp Duty on purchasing the property (capital expense).

• Legal Expenses for buying the property (capital expense).

• Renovation Expenses (repairs are deductible, renovations are not).

• Borrowing Expenses for any part of the loan used for private purposes.

Understanding these deductions can significantly improve your investment strategy and financial health.

 

Credit: Chris Dang 

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