The Accountants

Property Investment Tax Deductions: Maximising Your Returns

Investing in property can be a smart financial move, but to truly maximise your returns, it’s essential to understand the tax deductions available to property investors. The Australian Taxation Office (ATO) allows various tax deductions that can help offset costs and improve cash flow. However, failing to claim deductions correctly can result in missed savings or ATO scrutiny. Here’s what every property investor needs to know about tax deductions.

1. What Expenses Can Property Investors Claim?

Property investors can claim a range of expenses to reduce their taxable income. These include:

• Loan Interest: The interest portion of your mortgage repayments is tax-deductible if the property is rented out.
• Depreciation: Claimable on both the building structure and fixtures such as carpets, appliances, and furniture.
• Property Management Fees: Costs paid to property managers for overseeing rentals can be deducted.
• Council Rates and Water Charges: If you pay these as the property owner, they are deductible.
• Repairs and Maintenance: Fixing wear and tear (e.g., plumbing, painting) is deductible, but improvements must be claimed as capital works.
• Landlord Insurance: Protecting against rental loss or property damage is an allowable deduction.
• Advertising Costs: If you pay to advertise your rental property, these costs are deductible.
• Strata Fees: If your property is in a strata complex, the fees paid are deductible.

2. Common Mistakes to Avoid

• Claiming Personal Use Expenses: If you use your investment property for personal holidays, you can only claim deductions for the period it is rented out.
• Not Keeping Proper Records: The ATO requires evidence for all claims, including receipts, invoices, and bank statements.
• Incorrectly Claiming Repairs vs. Improvements: Repairs are deductible immediately, but improvements must be depreciated over time.
• Overlooking Depreciation: Many investors fail to claim depreciation on fixtures and fittings. A depreciation schedule from a quantity surveyor can help.
• Failing to Adjust for Partial-Year Rentals: If your property was only rented out for part of the year, your deductions must be adjusted accordingly.

3. How Depreciation Can Save You Thousands

Depreciation is one of the most underutilised tax deductions for property investors. The ATO allows claims on:

• Building depreciation (capital works) for properties built after 1985.
• Plant and equipment depreciation for items like air conditioners, carpets, and appliances.

A professional depreciation schedule prepared by a quantity surveyor can identify all eligible deductions, potentially saving you thousands of dollars annually.

4. Tax Implications When Selling

If you sell your investment property, Capital Gains Tax (CGT) applies to the profit made from the sale. However, there are ways to reduce CGT liability:

• Holding the Property for More Than 12 Months: Qualifies for a 50% CGT discount.
• Offsetting Capital Gains with Capital Losses: Losses from other investments can be used to reduce CGT.
• Primary Residence Exemption: If the property was once your primary residence, you may be eligible for an exemption.

5. Getting Professional Advice

Property investment tax rules are complex, and errors can lead to ATO audits or lost savings. A tax agent can ensure you are maximising your deductions legally while remaining compliant.

Final Takeaway: Claim Every Deduction You’re Entitled To!

Investing in property comes with significant financial commitments, but tax deductions can help offset many expenses. Keep detailed records, get a depreciation schedule, and consult a tax professional to ensure you’re not leaving money on the table. Make tax time work for you and boost your investment returns today!

The Team at The Accountants and The Finance Brokers are here to help you navigate your cash flow requirements in your business. We offer complimentary cash flow reviews and assist you in understanding your finance needs.