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With EOFY rapidly approaching – now is the right time to assess qualifying tax deductions for investment properties. To help explain these deductions, the below information from Mckinley Plowman details five potential considerations in preparation for tax time.

1. Interest

You are able to claim interest charged for loans as a tax deduction for accounts related to investment purposes. This can include interest accrued through a mortgage on an investment property, money borrowed to buy shares, or other loans relating to investment portfolios.

2. Rental expenses

Owners of rental properties are able to claim many property-related expenses to offset the amount of tax paid each financial year. The most common and readily available deductions include:

• Advertising costs
• Body corporate fees and charges
• Council rates
• Water rates
• Land taxes
• Cleaning
• Gardening
• Pest control
• Insurance
• Property agent fees and commissions
• Property repairs and maintenance

3. Depreciation of building and assets

There’s a common misconception that newly built residential properties offer the greatest tax break when it comes to depreciation, however owners can still claim deductions on depreciating assets no matter the age of the property!

When it comes to investment properties, depreciation is one of the highest potential returns at tax time, with knowledgeable investors often driven by depreciation potential from the outset when purchasing new property.

Things like carpets, window dressings, bathroom fittings, dishwasher and air conditioning units all qualify for depreciation as they age. The Australian Tax Office (ATO) lists all the items you can claim on and how long they should last – however a qualified accountant can advise.

4. Loan costs

Interest may be the largest (and most intimidating) fee people think of when it comes to home loan management, but there are a lot of other charges that can quickly add up.

These loan costs can often be claimed for investment properties, with tax deductions available for things like loan establishment fees, account management fees, mortgage insurance fees, mortgage registration, mortgage broker fees and stamp duty on the loan (not the property). Most of these claims are made over a five-year period, as part of borrowing costs, and can add up to hundreds of dollars in tax deductions each financial year.

5. Accounting costs

While most people pay accountants to manage their tax returns, not everyone realises that this service could help you pay less tax. As well as giving you access to professional accounting advice that may help you find more ways to reduce your tax, the actual fees and charges you pay for managing your tax affairs are claimable as tax deductions every financial year.
 

• Source: https://www.mckinleyplowman.com.au
• Source: https://www.nab.com.au/personal/life-moments/home-property/invest-property/depreciation-older-property