Tax Deductions For Investment Properties In 2021: What Can You Claim?

Article by Davina Deluao

As we approach the end of an eventful financial year, plenty of us will be busy preparing to lodge tax returns for the year that was. For property investors, it is beneficial to be prepared and stay informed about what you can claim on tax deductions for investment properties. After all, everyone would like to minimise their tax bill, but you don’t want to find yourself in hot water with the ATO for claiming expenses you shouldn’t be. In this article, we look at a few of the top things property investors can claim on their tax returns this year. Please note this information is of a general nature only and does not constitute professional advice.

What constitutes an investment property?

You are eligible to receive tax deductions for rental properties on the basis that the property is presently being used to generate an income. This would mean that there’ll no longer be deductions available for owners of vacant land where a rental property hasn’t been built yet. However, residential homes that are being used for business purposes and by employees who are working from home will be accepted.

What Can You Claim Back? 

According to the Australian Taxation Office, there are a number of expenses that can be claimed and immediately deducted. These include:

  1. Property Fees

As with any property, you would have to pay compulsory fees to ensure that the place is well taken care of. You will be able to claim body corporate fees, council rates, quantity surveyors’ fees, bank charges, interest on loans and tax-related expenses. In addition, building, contents and public liability insurance are also covered.

  1. Property Management

There are multiple steps you’ll have to take in order to secure tenants and ensure that the place is being managed properly. Therefore, you are able to also claim costs related to advertising, property agent’s fees and commission, depreciation costs, letting fees, tenant-related legal expenses and secretarial and bookkeeping fees.

  1. Property Maintenance 

With a lot of ongoing expenses required to regularly maintain the property in quality condition, investors can expect cleaning payments, electricity and gas bills, water rates, gardening and lawn mowing services, pest control services, and security patrol fees to be included. Phone bills, stationery and postage costs, in-house audio or video service charges, and other repair fees are also part of the tax deductions for rental properties.



What Should You Be Mindful Of?

Here are a handful of conditions to remember:

  1. Although it’s necessary for investors to check up on their rental properties, you may not be able to claim travel expenses for inspections, relocating assets or for attending rental seminars.
  2. Also, the costs from using the property as a holiday home for part of the year or for non-income producing purposes won’t be deducted.

  3. While repairs and maintenance are deductible, there may be some renovations that will be deductible over a few years as it’s considered to be capital works. 

  4. The expenses incurred by tenants, such as paying for monthly utilities, are also recognised as claims that can’t be deducted.

When it comes to tax deductions for rental properties, there is a lot of information to stay on top of and the rules around what you can and can't claim may change over time. Through seeking professional advice and practicing good record-keeping, you’ll be able to easily keep track of what you can claim and minimise what you have to pay to the taxman. For more details and a full list of what you can and can’t claim, visit the ATO website www.ato.gov.au and read through their guides for rental owners.

If you’re wanting to find out more and receive free advice about purchasing an investment property, get in touch with the iBuyNew team today to see how we can be of assistance.

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Published on 24th of June 2021 by Michelle Leftwich
Michelle Leftwich
Michelle Leftwich

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