What can you deduct on investment property that Maximize your profit? And, cut the cost of tax!


Date:2016-08-26
- Shree Krishna Shrestha
 
I am not an expert tax accountant. And I don’t have any degree in accounting. As you probably guess by now, I am not a licence/register taxman. However, I would like to share my knowledge with you. What I know about tax. It might help you to save your thousands of $$$!
 
We are very close to end of financial year. Let’s have a look at some of the categories, which are tax-deductible when it comes to rental properties.
 
1. Borrowing expenses
The cost of obtaining finance from your lender is mostly considered a capital expense. Those cost may include, stamp duty paid on mortgage document, legal cost, valuations, surveys, search fees and etc.
To add on, the costs associated with discharging a mortgage on property used, as security for income producing purposes is also fully deductible.
 
2. Bank Charges
Any fees that cost to maintain the account, which receives rent and has expenses paid for it, are fully tax-deductible.
 
3. Accountant fees
All the costs for hiring an accountant to prepare reports related with the property are fully tax-deductible.
 
4. Advertising for tenants
In general, managing agent normally paid any cost of advertising. However, if there are costs to you, these are fully tax-deductible.
 
5. Acquisition and disposal costs
Remember, you cannot claim a deduction for the costs of acquiring or disposing of rental property. Such as, purchase cost, stamp duty on the transfer of the title, conveyancing costs and advertising expenses. However, if you have obtained the property after the 19 September 1985, these costs may form part of a cost base of the property for capital gains tax purposes.
 
6. Body corporate fees
If your property is part of a large complex, which has common areas, any costs associated with maintaining these common areas by body corporate.
 
7. Council fees
All fees paid to the local government authority are tax-deductible against the income earned from your investment property.
 
8. Cleaning expenses
If the property is rented with cleaning provide, such as holiday apartment, resort complexes. And also, if cleaning is required after a permanent tenant has vacated your rental property, this fee is tax-deductible.
 
9. Electricity and gas
In some case, if these services are provided to the tenant inclusive in their rental payment, in which case the expense is tax-deductible against the rental income.
 
10. Insurance 
Any insurance you many have against rental income of your property it’s all tax-deductible. Insurance could be building, contents, landlord and public liability.
 
11. Garden Maintaining
These expenses are regular maintenance expenses, which can either form part of the rental inclusion when renting a property, or may be periodic expenses. These expenses are all tax-deductible against the rental income.
 
12. Interest on loan
Interest on amount that is borrowed to purchase an income producing property can be claimed as a tax-deduction against the income produced by that property, even if the interest exceeds the rental income, e.g. negative gearing.
 
13. Mortgage discharge expenses
Mortgage discharge expenses are the costs involved in discharging a mortgage other than payments of principal and interest.
 
14. Pest control
The regular maintenance and pest control on your rental property is a tax-deduction against the rental income received.
 
15. Property agent’s fees and commissions 
When you have a property managed by an agent, fees and incidental charges associated with this management service are fully tax-deductible.
 
16. Quantity surveyor’s fees
A quantity surveyor is a qualified professional who will provide an assessment of the value of your rental property building and improvements and the fixtures and fittings on which you can claim depreciation. This is highly recommended for all rental properties.
 
17. Repairs and maintenance cost
The costs of repairing any part of the fixtures and fittings, or the building of a rental property are fully tax-deductible.
 
18. Timing your repairs
The timing of your repairs is integral to maximising the benefit of any tax-deductions that you may be able to claim. If you’re going to repair your rental property anyway and you could bring forward that expense into the current financial year, when potentially your other income might be higher in that case the tax-deduction you would receive for conducting that repair would be worth more to you if incurred in this financial year rather than the next.
 
19. Replacement expenses 
An immediate deduction is available for depreciating assets costing $300 or less, which is used predominately to drive assessable income. Also assets costing less than $1000 may be written off through the low pool method.
 
20. Water charges
Water and excess water charges may also be claimed tax-deduction against the rental income from the property.
 
21. Bookkeeping fees
Any cost for maintaining adequate records on the rental property is fully tax-deductible.
 
22. Security fees
Cost related with maintaining adequate security on your investment property such, as security patrols are fully tax-deductible.
 
23. Travel and car expenses
Travel expense relating to rent collection, inspection of the property and provision of maintenance of the property are fully tax-deductible.
 
24. Servicing costs
Regular servicing fees for appliances and fittings are fully tax-deductible.
 
25. Stationery, postage, telephone calls, incidental expenses and service rental 
These expenses incurred by the landlord on an investment property and all costs associated with preparing taxation return and recording tax related methods to do with property are fully tax-deductible.
 
Discloser: – None of the information contained within this article constitutes, or is intended to constitute, a recommendation by the writer that any particular security, investment or tax strategy is suitable for any specific person. None of the information contained in the article is, or is intended to be, personalised tax advice. Investments or tax strategies mentioned in the article may not be suitable for all individuals. All readers of the article should make their own independent decision regarding investment & tax. The material contained in the article does not take into account each reader’s particular investment objectives, financial situation or needs. This is general advice only from the writer own experience and research. All readers should strongly consider seeking advice from their own personal tax adviser based on their specific circumstances.
Reference:
Boholt, D. (2014). Tax Secret Of a Real Estate MIllionaire. DymphnaBoholt.com.
 
Property | Australian Taxation Office. (2016). Ato.gov.au. Retrieved 22 July 2016, from https://www.ato.gov.au/General/Property/.