Investment Property Tax Deductions


One Minute Tax can advise you on what can be claimed and help prepare all relevant tax documents relating to investment property tax deductions.


What Can You Claim And How To Maximise Your Tax Benefits

There are some very useful tax benefits for investment property in Australia.  These include the availability of capital gain tax discounts or potential exemptions,  the negatively geared tax treatment for the tax payers to receive tax refund potentially when lodge income tax return at the end of each financial year. Let’s first start with the capital gain related aspects.

Obtaining And Owning A Investment Property:

If you rent out your current property or invest in a rental property, any capital gain you make when selling or otherwise disposing of the property will be subject to capital gain tax (CGT), even if it is a holiday home or hobby farm, except in some circumstances you can be exempted from capital gain tax. ( Please contact our accountant to find out more. ) In the case of holding the investment property for more than 12 months,  it will reduce any capital gains by 50%.

Cost Base In Investment Property

To calculate the cost base of capital gain asset, we consider buying, holding and disposing of charges associated with the asset. Cost base will help you understand what property capital gain  tax deductions you can claim? The cost base is made of five elements that include:

  • Money paid to acquire the asset
  • Any incidental cost associated while acquiring the asset
  • Owning cost
  • Installation or removing cost that will increase the capital cost of your asset
  • Cost of title and rights to asset

It is very important to keep records right from the start, then it become a smooth process for our accountant to work out the capital gain tax when you sell the property.

Investment Property Tax Deductions You Are Able To Claim!

According to Bureau of Statistics, an average Australian income is A$81,947 per year and 7.9% of them owns investment property. Knowing the fact that, you can minimize tax liability on your investment property.

There are great property tax deductions but only claim it when you completely understand what can be deducted as an expense or as depreciation? Every property expenses will differ from other. It is highly recommended to seek help from tax accountant to calculate your property tax deductions.

Australian Taxation Office has provided a complete list of expenses which can be claimed in an income year.  Let’s comprehend what you can claim:

Interest expense on investment loan

It includes interest paid on the property loan. Interest can be claimed in following three conditions:

     If the loan amount is used to purchase the depreciating asset.

     For repair of the property or

     For renovation of the asset

To claim this deduction, the property should be rented or available for rent in an income year. In case if you are starting to use property for private purpose, you can’t claim interest expense for that specific period.

Capital works deduction

Capital works deductions are related to construction expenditures, these deductions are spread over the period of 25 to 40 years. For a quick reminder, these expenditures should not increase construction expenditures and deductions can’t be claimed until the construction is complete. These deductions are:

  • Extension cost
  • Cost of alteration
  • Structural Improvement cost

To determine exact capital work expenditures, you as property investors may need quantity surveyor, a supervising architect or project organizer to determine the outlay.

Effective life of an asset

This tool determines how long an asset will remain in service? This term is expressed in years. For the purpose of producing exempt income, you will presume the followings:

  • The wear and tear, you will expect from use of property.
  • The asset will be in good condition.
  • Expected period in which your property will be scrapped, sold or will get abounded.

legal expenses

Legal fees subject to rental income is deductible. This includes:

  • Evicting cost if tenant is not paying the rent.
  • Court action to recover loss of rental income.
  • If a third party suffered any injury on your rental property in a lease period. According to the legislation of ATO, you can defend such damages.

Borrowing Expenses

Second type is the borrowing cost that is directly incurred to acquire loan for a property. The list includes:

  • Fees associated with loan establishment
  • Title search fees
  • Cost of filling and preparing mortgage fees
  • Broker fees to acquire loan
  • Lender’s mortgage insurance
  • Valuation of asset fees for loan approval
  • Stamp duty charged on the mortgage

Other than the above mentioned deductions, there are some more like:

  • Advertising for tenants
  • Body corporate fees and charges
  • Cleaning and Gardening cost
  • Council rates
  • Insurance
  • Repairs and Maintenance
  • Pest control
  • Land tax
  • Agents fees if the rental property is managed by the Real Estate
  • Office supplies including stationery
  • Other sundry expense which are relevant
  • Electricity and gas

ONE MINUTE TAX, Your Investment Property Tax Expert!

We are one of the best tax agent in Melbourne. Our CPA qualified tax accountant is just  one click away to help you investigate the financial and tax matters like Investment property tax deductions, expertise in Xero, MYOB and Quickbooks, online tax return for both individual and company. Our Tax Accountant Do It For You tax return package for investment property tax return start from only $100 per property. Want to claim extra thousands of dollars tax benefits for your investment property? 

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