Tax Deduction

When tax time arrives, tax deductions involving rental properties are always in the spotlight.

You can claim a deduction for certain expenses you incur during the period your property is rented or available for rent. However, you cannot claim expenses of a capital nature nor can you claim for private expenses.

To break it down, there are three categories of rental expenses. They include those for which you:

  • Cannot claim deductions
  • Can claim an immediate deduction in the income year you incur the expense
  • Can claim deductions over a number of income years

An example of expenses which you cannot claim a deduction for include those not related to the rental of the property, such as expenses incurred while you are using it as a holiday home. Also, the costs of acquiring the property or disposing of it are not deductible.

Expenses for which you may be entitled to an immediate deduction include the costs of advertising for tenants, council rates, water charges, land tax, insurance, agent’s fees, repairs and maintenance and any other immediate expenses you incur while the property is being rented or available for rent.

There are also some expenses that may be claimed over a number of income years, such as borrowing expenses, amounts for decline in value of depreciating assets and capital works deductions.

A detailed explanation of all of these deductions can be found in an information pack on the Australian Tax Office’s website