With tax time approaching now is a good time to get your paperwork in order to make sure you maximise your return.
You can claim a deduction for your related expenses for the period your property is rented or is available for rent.
- management and maintenance costs, including interest on loans, can generally be claimed immediately (that is, deducted against your current year's income).
- borrowing expenses, depreciation and capital works spending can be deducted over a number of years.
You can't claim:
- expenses not actually paid by you, such as water or electricity charges paid by your tenants
- acquisition and disposal costs, including the purchase cost, conveyancing and advertising costs and stamp duty* on the title transfer – instead, these are usually included in the property's cost base, which would reduce any capital gains tax when you sell the property
- GST credits for anything you purchase to lease the premises – GST doesn't apply to residential rental properties. However, when claiming the expense as a deduction, you claim the total amount you've paid (inclusive of GST, if applicable).
*Unlike stamp duty on the transfer of freehold title, stamp duty on the transfer of a property under the ACT's leasehold system is generally deductible (see Expenses for which you can claim an immediate deduction, 'Lease document expenses').
Expenses deductible immediately – management, maintenance, interest.
You can generally claim an immediate deduction (that is, against your current year's income) for your expenses related to the management and maintenance of the property, including interest on loans.
If your property is negatively geared you may be able to deduct the full amount of rental expenses against your rental and other income, such as salary and wages and business income.
To claim deductions for expenses, your property must include a dwelling that is rented or available for rent – for example, advertised for rent. If you're building a rental dwelling, you can claim deductions for the land while you are building.
Expenses for which you may be entitled to claim an immediate deduction include:
- advertising for tenants
- body corporate fees and charges
- council rates
- water charges
- land tax
- gardening and lawn mowing
- pest control
- insurance (building, contents, public liability)
- interest expenses
- property agent's fees and commission
- repairs and maintenance
- some legal expenses.
Expenses deductible over several years – borrowing, decline in value, capital works.
The following expenses for your rental property may be deducted over a number of income years:
- Decline in value of depreciating assets
- Capital works
A rental property is generally any real property that you rent out in exchange for income.
If you own a rental property, you can only claim tax deductions for expenses if the property is rented out or genuinely available for rent.