• Apple Accounting

Rental expenses you can claim

No property investors would be happy if they miss out the rental expenses which they are entitled to claim. But firstly, a clear idea must be learnt on what expenses are actually deductible, especially if you have just bought your first investment property and will lodge the tax return with a rental property schedule for the first time. An experienced tax agent will remind you of the possible deductions. However, as per the “no records no claim rule”, you cannot claim the rental expenses without supporting documents. So even though your tax agent might give you some tips, the duty of record keeping is entirely on you. Having a good system of record keeping throughout the year is very important, it ensures that your rental expenses can be substantiated and claimed.

There are THREE main categories of rental expenses:

1. Expenses to be claimed in the year when it is incurred.

2. Expenses to be claimed over several years.

3. Non-deductible expenses.

Now let’s take a closer look at each of them.

1. Expenses to be claimed in the year when it is incurred.

Please refer to the list below and find the expenses applicable to your situation.

Common expenses

· Advertising fees

· Body corporate fees/ Strata levy

· Cleaning

· Council rates

· Depreciation report cost

· Garden maintenance

· Gas and electricity bills

· Insurance

· Interest on loans

· Internet access

· Land tax

· Lawn mowing

· Management fee/ property manager fee

· Pest control

· Pool maintenance

· Postage

· Property maintenance

· Property repairs

· Stationery

· Telephone calls

· Water rates

Uncommon expenses (but still deductible)

· Accounting software fee (some investors are using it for bookkeeping)

· Education/course fee for property investment

· Home loan annual package fee

· Some legal expenses (e.g. legal issue with the tenants or lease preparation)

2. Expenses to be claimed over several years

· Borrowing cost more than $100 must be claimed over 5 years or over the loan term, whichever is less. It includes:

> loan establishment fees

> title search fees charged by your lender

> costs for preparing and filing mortgage documents

> mortgage broker fees

> stamp duty charged on the mortgage

> fees for a valuation required for loan approval

> lender's mortgage insurance billed to the borrower

· Depreciation of capital items over $300 (dishwasher, hot water system etc.) only if purchased by you

· Capital Works (improvements or additions to the property – bathroom renovation, new gazebo etc.)

It is important to differentiate the repairs with capital improvements. Because repairs can be claimed instantly, while capital improvements need to be depreciated over years. This difference will have significant impact on the tax outcome. Generally, the repairs must relate directly to wear and tear or other damage that occurred as a result of your renting out the property, for example replacing broken parts of fence. Capital improvements improve the condition or value of an item beyond its original state at the time of purchase.

3. Non-deductible expenses

The cost of travel incurred in relation to a residential rental property became a non-deductible item after 30/06/2017.

If the expenses (e.g. water or electricity charges) were paid by tenants, the landlords cannot claim them in their tax return.

Acquisition and disposal costs, including the purchase cost, conveyancing and advertising costs and stamp duty on the title transfer outside the ACT are not claimable in your rental property schedule, instead, they are usually included in the property’s cost base to reduce any capital gains tax when you sell the property.

If you still feel confused after reading this article, a simple solution here:

Just do good RECORD KEEPING and give it to Apple Accounting or your existing tax agent to analyse!

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