Owning a rental property that generates income? Or perhaps you’re considering an investment in rental properties? While there are valuable deductions that can enhance your tax refund, the Australian Tax Office (ATO) has recently tightened the rules on rental property expenses. With limited room for errors, it’s crucial to know what you can and can’t claim at tax time. Our certified tax accountants at Supertax have broken down the complexities into an easy-to-understand guide.

Rental Property Tax Deductions You Can Claim

You can claim various expenses related to owning and operating your rental property. These include:

1. Advertising Costs: Expenses for advertising for tenants on websites like domain.com.au or realestate.com.au.
2. Bank Fees: Fees related to generating your rental income.
3. Body Corporate Fees: Applicable if you own a unit or townhouse.
4. Capital Works: Depreciation on improvements made to your property.
5. Cleaning Costs: Costs for cleaning the property at the end of a lease period.
6. Council Rates: Covering services like rubbish collection and street maintenance.
7. Gardening and Lawn Mowing: Costs you incur for these services.
8. In-house Audio/Video Service Charges
9. Insurance: Building, landlord, and contents insurance.
10. Interest on Mortgage: Note that only the interest is deductible, not the principal repayments.
11. Land Tax: If applicable.
12. Lease Costs: Costs related to preparation and registration of leases.
13. Legal Expenses: For maintaining the property or managing tenant issues.
14. Pest Control: Costs for dealing with pests like mice, ants, or termites.
15. Property Agent’s Fees: Commissions for renting out your property.
16. Quantity Surveyor’s Fees: For estimating construction costs.
17. Repairs and Maintenance: To ensure the property remains in good working order for tenants.
18. Stationery and Postage: For interacting with your property manager or tenants.
19. Tax-Related Expenses: Managing your tax affairs.
20. Telephone Calls and Line Rental: Related to the rental property.
21. Utilities: Water, electricity, and gas bills covered by you.

Rental Property Tax Deductions You Can’t Claim

There are certain expenses you cannot claim for your rental property, including:

1. Household Bills Paid by Tenants
2. Private Borrowing Costs: Expenses related to borrowing against the equity for personal use.
3. Personal Use Expenses: Costs incurred when using the rental property for personal purposes.
4. Buying or Selling Costs: Including advertising, conveyancing, building inspection reports, travel to view the property, and stamp duty (these may be part of the cost base for Capital Gains Tax).
5. Travel Costs: For inspecting or maintaining the property (disallowed as of 2017).
6. Second-Hand Depreciating Assets: Purchased after 7:30 pm on 9 March 2017, including items like floor coverings, air-conditioning, and appliances. Fixed and structural items are still deductible.

Special Conditions to Note

1. Available for Rent: Only claim expenses for periods when the property is rented out or available for rent. The ATO has tightened rules on properties used as holiday homes.
2. Partial Rental: If only part of your property is rented out, only claim expenses proportionate to that part.
3. Proof of Purchase: Maintain records like bank statements, invoices, or receipts, and show the property was rented or available for rent during the financial year. For depreciation or capital works, keep the relevant schedules.

Expert Tax Advice for Your Rental Property

Congratulations on taking the first step towards becoming a tax-savvy rental property owner! By keeping these tips in mind and staying organized, you’ll be well-prepared for tax season. For peace of mind and to maximize your deductions while minimizing your tax burden, Supertax’s friendly team of tax agents is here to help. We understand the intricacies of rental property taxes and ensure you get the best possible outcome.

Don’t navigate tax time alone – contact Supertax today for a stress-free tax experience and the assurance of expert guidance. Let’s make tax time easy and beneficial!