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1. Rent

• The income received is taxable to the owners of the property in the same proportion as the ownership interest as shown on the title.

• The rent received must be at normal market rates to be able to claim all the expenses in full. If you rent at below market rent (to family or friends perhaps), you can only claim deductions up to the amount of rent charged.

2. Interest Claims

• Interest paid on the loan used to purchase the property is deductible, provided that all the money borrowed was used to purchase the property.

3. Tax Deductions

• Repairs

Repairs made to the property during the period it is leased are deductible but generally not repairs carried out within the initial 12 months of owning the property (these can be used to reduce a capital gain on disposal).

• Improvements

Improvements you make to the property are not deductible in full. They need to be depreciated and claimed over their effective life.

• Other expenses can include

  • advertising for tenants

  • bank charges

  • body corporate fees

  • cleaning

  • council rates

  • electricity and gas

  • gardening

  • lawn mowing

  • in-house audio/video service charges

  • insurance

  • land tax

  • legal expenses re leases etc.

  • lease costs

  • pest control

  • mortgage discharge expenses

  • property agent’s fees

  • quantity surveyor’s fees

  • security

  • water charges

  • lenders mortgage insurance (usually written off over the shorter of the term of the loan or 5 years)

4. Building cost write off

If the building is under 25 years old you will be entitled to claim a deduction of 2.5% per year of the original cost of construction of the building for up to 40 years from the original date of construction.

If you do not know the building cost you can contract a quantity surveyor to determine the building costs and prepare the depreciation schedules for the property and determine what can be claimed.

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It is advisable to get guidance from a Tax Professional when finalising taxes, specially if you have an investment property in the mix!