Invest in tax time tactics for rental properties

If you are one of over 1.69 million* Australian property investors preparing to lodge their annual tax return, are you aware of what to declare and how to make the most of your investment strategy?

June 21, 2011

If you are one of over 1.69 million* Australian property investors preparing to lodge their annual tax return, are you aware of what to declare and how to make the most of your investment strategy?

Ahead of the next financial year, thoroughly research your tax obligations and claimable expenses to find out how to use these to your advantage for this tax return and for the future.

Mortgage Choice company spokesperson Kristy Sheppard said, “If you haven't already, now is an ideal time to assess your financial position, re-examine suitable investment strategies and explore ways to better use these to benefit your tax situation and property goals.”

“There can be numerous tax and other benefits associated with owning an investment property. The trick is to know what they are and how to make the most of them over the short and long term.

“Negative gearing entices some investors to property. This occurs when the combination of annual home loan interest repayments plus any deductible expenses is higher than the rental return. The loss is offset against an investor's gross income, meaning they are taxed on the reduced amount. On the other hand, positive gearing – where rental income exceeds the deductible expenses and loan interest – is preferred by others. It is an individual decision to make with care.

“Despite the tax benefits and potential for long-term capital growth, it may be tricky to eventually profit from a property that runs at a loss. It is a good move to consult a professional tax adviser and mortgage broker before choosing a loan and buying property, to learn about the tax deductions available on your potential investment and what home loans suit your plans. You may also want to glean knowledge from property research companies, buyers' agents and financial advisers.”

Mortgage Choice suggests investors review the following aspects of their strategy: 
Know what to claim
As an investor you may be able to claim tax deductions for your rental property/ies on expenses such as: travel to collect rent or inspect the property, advertising to attract a tenant, property agent and/or management fees, body corporate fees, council rates, gardening, cleaning, pest control, building insurance, repairs and maintenance, water, home loan fees and loan interest. Check the Australian Taxation Office for a list of claimable rental expenses and/or consult a tax professional.

Don't forget capital gains tax
Unless there is a capital gains tax exemption when selling your property (ie. it is your principal place of residence), you pay tax on profit made above the original purchase price. Keep in mind capital losses (ie. no profit is gained upon selling it) are not deductible against your ordinary taxable income but they are used to reduce any other capital gains you make from assets during the financial year or any gains in subsequent years. Consult a tax professional for advice. 

Pay your interest-in-advance
Interest-in-advance loans are similar to standard fixed-rate interest-only loans but you pre-pay the next year's interest before 30 June and claim it as a tax deduction in the current year. This means that upon lodging a tax return, eligible investors can effectively receive a portion of their interest back via a tax refund. Keep in mind individual circumstances differ so it's always clever to seek expert advice from your tax accountant and a mortgage broker.

For home loan tips, trends, facts, data and other information, visit


* Number of Australians who claimed rental property deductions in 2008-2009, according to the latest figures from the Australian Taxation Office.


For further information or to arrange an interview, please contact:

Belinda Williamson      
Mortgage Choice     
(02) 8907 0472 or 0407 416 124

Other articles you might like

More articles

Sign up for media releases and more

Subscribe and stay informed with Mortgage Choice news and industry insights.