What You Can Claim On Tax For Rental Properties

What You Can Claim On Tax For Rental Properties
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Negative gearing rules mean that more than 1.3 million Australians claim deductions each year for a rental property they own. If you’re one of them, make sure you’re following the rules.

Picture by droob

The key distinction in managing a rental property in tax terms is knowing the difference between expenses that can be deducted immediately (such as interest on the loan used to buy the property, maintenance, repairs and lease preparation costs) and those which have to be spread out over a number of years (such as major improvements or capital works). While the latter can be claimed immediately if they’re less than $100, that seems pretty unlikely. And don’t assume that just because you’ve spent money as part of an investment purchase, it qualifies as a deduction. A common mistake for new rental property owners is to assume that their conveyancing costs are immediately deductible — they’re not.

What can’t you claim? If you have a loan largely used to purchase an investment property but you’ve used part of that money for other purposes like buying a car, you should exclude the interest associated with that secondary purchase. You also can’t claim the costs of travelling to inspect or manage the property if the main purpose of that trip is a personal holiday. (If you own a holiday home which is also rented to others, you need to apportion costs to reflect that usage.)

The ATO link below contains links to lots more rental property advice and outlines of the different types of deductions available. As ever, you may need specific advice relating to your particular circumstances, but knowing the basic rules ensures that you (or your advisers) are less likely to make a mistake.

Investment essentials [ATO]


  • Let’s just get rid of private scumlords. You should be talking about how to drive them out of our neighbourhoods, not offering them financial advice!

    • Christian, nope — without scumlords property prices would crash. Well, they’re going to anyway of course, but it would happen a little sooner if speculation on residential properties were disallowed or taxed fairly. It won’t be of course (have a quick look at how many federal MPs use this means of seeking so-called passive income).

  • Bob, Have you thought about supply and demand in your argument against what you call ‘scumlords’? Would you prefer a ‘trotskyesque’ arrangement where the government owns all housing and we are given a shoebox as payment for giving our lives to the socialist state? Or maybe you would promote large corporations running estates where all houses look identical to improve margins for the shareholder? What are you on about?

    • Well Josh, I understand your skepticism concerning utopian airheads. That being said, I’d like to see a system implemented where individuals were only permitted to own one residential property at a time. In short, people would buy houses to live in & not to profit from, which would reign in the absurd escalation in property prices caused by speculation. Also, properties should only sell for the price at which they were originally purchased plus indexation based on inflation. I’m aware that this ramble probably qualifies me for the title of utopian airhead too, but I still think it’s a marvelous vision without being too socialist.

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