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Property Management guide to rental property tax deductibles
As investors in rental property you naturally must claim your rental property expenses against your rental income, to reflect accurately your tax obligations. Baxton Property Management in Hobart has split this very important section of the tax regulations into three sections to give you the necessary information in its on-going series on the tax implications of rental properties.
Types of deductions
There are three basic subdivisions into which deductions are split.
- Deductions that you cannot claim.
- Deductions that you claim in the same year as your stated rental income i.e. immediately.
- Deductions that you claim over a number of rental income years.
In this article we will examine the category of immediate deductions. Of all the subdivisions in deductions this one is the largest and we won’t be able to deal with this category in one article. We have broken down the deductions in this category into broad subdivisions, and will deal with complex topic over two or three articles. The following lists provide an overview of items that can be deducted immediately. We will look at some of the more complex issues in greater depth in future articles.
Repairs and maintenance
This is the simplest of the subdivisions to understand. The list of deductions is quite self-explanatory. The only anomaly in this category is capital works deductions. Suffice it to say that capital works deductions are subject to certain conditions and are generally split over several years. This will fall into another section of the series.
Most repairs and maintenance to deal with normal wear and tear, and to make sure the premises are habitable for a tenant, can be claimed immediately. However, they must be directly related to damage that occurred because you rented out the property, and because it continues to be rented out on an on-going basis.
Claims may still be possible even if the property is available for rental but standing empty for a short period because of cancelled bookings or because advertising doesn’t succeed in bringing in a tenant. If you no longer rent out the property, they may still count as deductibles, if the cost of the repairs was incurred while it was rented out.
- Replacing items like worn out or damaged curtains, blinds or carpets
- Repainting faded or damaged interior walls
- Replacing broken windows
- Maintaining plumbing
- Garden and lawn mowing
- Pest Control
- Cost of defective building works report
- Security patrols
- Servicing of existing installations, for example, a water heater.
- Travel and car expenses for inspection of the property, maintenance and rent collection.
- Water charges
- Advertising for tenants
- Bank charges
- Body corporate fees and charges
- Annual power guarantee fees for electricity and gas
- In-house digital subscription fees
- Insurance, which includes public liability, building and contents
- The preparation, registration and applicable stamp duty on lease documents
- Property agent’s fees and commissions. Interestingly, this includes expenses incurred prior to the investment property being available for rent.
- If you attend a seminar to improve the income producing capabilities of your rental property; you can claim these expenses.
- Quantity surveyors fees
- If the property is unfit for occupation for a period of time, and you have to relocate the tenants temporarily; you can claim the expense of the relocation.
- Secretarial and bookkeeping fees.
- Stationary and postage and telephone calls
Legal, rates and taxes
- Council Rates
- Interest on loans
- Land tax
- Legal Expenses. This doesn’t, however, include acquisition costs and borrowing costs
- Mortgage discharge expenses
- Tax related expenses
The important thing to note here, is that you may only claim these expenses if you incurred them yourself, and not if the tenant incurred them.
Our experts at Baxton Property Management in Hobart will continue to bring you articles related to rental property tax. As the principal property managers in Hobart, we are always available to our clients. Visit us at the Baxton website.
- Property managers on owners and tax: Private investors and income
- Tax: Maximising owner benefits?
- Important tax tips for property investors
We hope you enjoyed this article
The information contained in this article is based on the authors opinion only and is of a general nature which is not indicative of future results or events and does not consider your personal situation or particular needs. Professional advice should always be sought relevant to your circumstances.
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