Investment Property: Tax Deductions

Well, we are now six weeks into a new financial year, which means (if you haven’t already) it’s time to think about submitting your tax return.  If you are an investor with a rental property (or properties) there are deductions you can claim for against some of the expenses you incurred during the past financial year.

It is important to note you can only claim deductions for expenses that relate to the income-producing use of the property. You cannot claim a deduction for expenses relating to your personal use of the property.

There are also some expenses you can claim a deduction for prior to the property being genuinely available to rent – such as interest on loans.  You must incur these expenses with the intent of renting out the property; for example, renovating a property you intend to rent.  If your intention changes you can’t claim your expenses.

It is important to claim each expense under the correct expense type to make sure you treat it correctly for tax purposes.  Your rental property is positively geared if your deductible expenses are less than the income you earn from the property, i.e., you make a profit from the rental.  Your rental property is negatively geared if your deductible expenses are more than the income you earn from your property.

We aren’t taxation experts, so we highly recommend you engage the services of an accountant/tax agent to maximise your deductions and ensure your investment is working for you in the most favourable manner.

In the meantime, there is some detailed information on the Australian Taxation Office website which you may find useful.  Click here to access.