Tax time for landlords - what can you claim?
It’s that time of year when we start to get ready to lodge our annual tax return.
June 30 marks the end of the financial year, which means gathering your receipts, pay slips and bank statements, and finding out what you can claim.
If you have a rental property, now is a good time to dig out your financial records, work out what expenses you can claim as deductions, and prepare to declare all your rental-related income in your tax return.
What can I claim?
Landlords can claim a deduction for related expenses for the period their property is rented.
Each financial year, you can generally claim for expenses related to the management and maintenance of the property.
This includes:
- Advertising for tenants
- Body corporate fees & charges
- Council rates
- Water charges
- Land tax
- Cleaning
- Gardening & lawn mowing
- Pest control
- Insurance (building, contents, public liability)
- Property agent’s fees & commissions
- Repairs & maintenance
If you took out a loan to purchase a rental property, you can also claim a deduction for the interest charged on the loan – as long as the property is rented/genuinely available for rent in the financial year.
If your property is negatively geared, you may also be able to deduct the full amount of rental expenses against your rental and other income, such as salary, wages and business income.
There are other expenses that investors can claim, which accrue over time. These include:
- Depreciating assets (i.e. timber flooring, carpets, curtains, appliances)
- Initial repairs – any costs you incurred to fix defects/damage when you first purchased the property
- Capital works – costs of construction for major work like adding fencing or a garage, removing walls or major renovations to a room
What can’t I claim?
- Borrowing expenses for the property, including the amount you borrowed to purchase the property, stamp duty and legal fees
- Expenses paid by tenants (i.e. electricity or water bills)
What do I need to show the Australian Taxation Office (ATO)?
When you lodge your tax return, you need to show the ATO how much rent and rental-related income you received for the financial year. This can include:
- Rental bond returns i.e. if your tenant defaulted on rent or caused damage to the property
- Insurance payouts
- Letting & booking fees
Make sure you’re tax-smart this financial year by complying with all your tax obligations and entitlements by:
- Keeping your receipts – keep proper records over the period you own your investment property. Set up an easy record-keeping system and ensure it is updated regularly.
- Making sure you include all your rental income in your annual tax return
- Only claiming deductions for periods your property is rented/genuinely available for rent
- Not claiming deductions for periods that you use the property yourself
- Scanning copies of your receipts to make them easier to store
For the most up-to-date information, visit the Australian Taxation Office website here.
NB: the information provided is of a general nature and doesn’t take into account your personal financial circumstances – we suggest you seek independent taxation and financial advice.
Do you have questions about your investment and what you can claim? Contact Edwina Smith at edwinasmith@spmudgee.com.au for assistance.
