Are you claiming all your Rental Property tax deductions?
If you own an investment property (or are thinking of purchasing one) there are many related expenses that you may be entitled to claim as a rental property tax deduction.
However, the expenses you can claim as rental property tax deductions can vary depending on your circumstances. They can also be dependent on whether or not the property is rented or available for rent. In some cases, expenses can be claimed but over a number of years and in others, the expense cannot be claimed until the property is re-sold!
To avoid ATO troubles down the track, it’s important that you know you’re claiming the right rental property expenses the right way!
Here are a couple of mistakes that people often make!
- Maintenance and repairs done before leasing a property for the first time can be claimed as a tax deduction.
- The cost of renovations on an investment property can be claimed in full on the next tax return.
- Maintenance and repairs done on an investment property prior to it being leased CANNOT be claimed as a tax deduction.
- Renovation costs can be claimed as a tax deduction, but only at a rate of 2.5% a year over 40 years.
Changes to rental property tax deductions
The 2017 Budget threw out a couple of restrictions on what rental property investors can and can’t claim as a tax deduction:
- Travel expenses: Rental property investors can no longer claim tax deductions for travel expenses related to an investment property.
- Depreciation: Investors will only be able to claim depreciation on capital items – dishwashers, ceiling fans etc. – if they personally purchased the item. Depreciation can no longer be claimed on an item purchased by a previous owner.
Tax and rental properties can be complicated and we strongly recommend that you discuss what you are entitled to claim as a rental property tax deduction with a tax agent such as Etax Local. A tax agent will be able to advise you on many aspects of your investment future and make sure you:
- Clearly understand your options and the investment tax deductions you can and can’t claim.
- Know when and how you can claim the deductions you are entitled to.
- Help you with a strategy to help you manage future investment properties.
In the meantime, we’ve put together this simple infographic to help get you on the right path:
Please Note: These tips are of general nature only. Individuals are advised to speak to a qualified tax agent to get specific advice suited to their situation.