As an investor, it is important to claim as many deductions as you are legally entitled to. Every dollar that you save contributes to your overall investment return (which is the whole idea, right?) and improves your financial wealth.
As we come into tax time, we have outlined below some common costs that landlords and owners of investment properties are able to claim.
- Interest on your investment loan: You may claim interest incurred on any money that you have borrowed and used solely for investment purposes. This includes purchasing or selling the property, undertaking repairs and improvements, or dealing with tenant-related issues.
- Costs relating to buying, selling or renting the property. These includes conveyancing fees and advertising for tenants.
- Utilities: Any utility bills that are paid by you as the landlord. This includes council rates, strata rates, and water (if applicable).
- Holding costs: A blanket term for the various expenses involved with into owning an investment property and include body corporate fees, cleaning, gardening, building and contents insurance premiums, security, pest control, property management fees.
- Depreciation: Depreciation refers to the decreasing value of an asset over time, especially due to wear and tear. As a landlord, depreciation can be claimed for standalone, non-fixed items within the property including whitegoods and appliances, (dishwashers, fridges, ovens, washing machines & dryers), air conditioning, curtains, blinds and carpets. For properties built after 1985, you can even claim depreciation of the building materials itself (eg: concrete and brickwork).
- Repairs: Reasonably strict rules apply to repairs and maintenance costs. The landlord must only be restoring something back to it’s original condition due to tenant wear and tear. If the repairs are fixing damage that already existed when the property was purchased and first put up for rent, these are considered capital in nature and are not deductible. Tax-deductible repair costs include fixing a leaking tap, repainting damaged walls, replacing damaged guttering, or fixing a dishwasher that has stopped working. An example of an improvement (which is not deductible) includes replacing a laminated kitchen bench top with granite.
For investors, it really pays to be well-informed about your tax deductions. Advice from your accountant is absolutely essential to ensure you are claiming everything you are entitled to , and also staying on the right side of the every changing tax rules.
If you are looking to invest, and really not sure where to start, as your mortgage broker, I can offer you advice and refer you through to the people that will help make it happen for you and make your investment as profitable as possible for you.
As always, if you have any questions, don’t hesitate to get in touch with us on 02 8920 3455