To lower your tax amount, there are some deductions you can claim when you own a rental property.
1. Interest on your investment loan
The interest on your investment loan for the year, plus any bank fees for servicing that loan, are tax-deductible. You can’t, however, claim your repayments on the principal sum.
2. Repairs and maintenance
Maintenance and repairs costs can be claimed if it is due to wear and tear and not a home improvement. Note that you can only claim for repairs and maintenance conducted during periods when the property was rented or genuinely available for rent.
You may be able to claim depreciation on new assets that are separately identifiable, not part of the structure of the building and not likely to be permanent (such as air conditioning systems). These rules can be complex, so it’s best you speak to a tax professional or a quantity surveyor.
4. Advertising costs
You usually have to advertise to find tenants. These advertising costs are tax-deductible.
5. Property management costs
Managing an investment property can rack up a lot of costs. You can claim back some of those costs, such as:
- Body corporate and strata fees
- Cleaning costs
- Garden maintenance
- Council rates
- Water supply charges
If you use a property manager to oversee the management of the property, you can claim for the agent fees and commissions.
6. Losses on negatively geared properties
Positive-cashflow properties bring in a rental income that covers the property’s running costs and turns a profit. Negatively geared properties operate at a loss (i.e. the rent doesn’t cover the property’s expenses). But there is one benefit – you can deduct the loss from your taxable income.