What expenses can you claim on your rental property?

As an owner of a rental property, you are entitled to claim tax deductions for some of the expenses you incur while your property is rented or available for rent. 

To work out what you can and cannot deduct from your tax, you need to understand which expenditure category your costs fall into.  

The three categories are: 

  1. An expense you cannot claim a deduction for.
  2. An expense you can claim an immediate deduction for in the income year you incur the expense.
  3. An expense you can claim deductions for over a number of income years.

Non-deductibles

Expenses you cannot claim deductions on include: 

  • Acquisition and disposal costs of the property e.g. purchase cost, conveyancing costs, advertising expenses and stamp duty on the transfer of property.
  • Expenses not actually incurred by you, such as water or electricity charges paid for by your tenants.
  • Expenses that are not related to the rental of a property, such as expenses connected to your own use of a holiday home that you rent out for part of the year.

Immediate deductions

Immediate deductions are expenses you can claim in the same income year you incurred the cost, the proviso being they were incurred at your expense (not your tenant’s expense). 

Immediate deductions would include expenses like: 

Advertising for tenants

Bank charges

Body corporate fees and charges

Cleaning

Council rates

Electricity and gas

Gardening and lawn mowing

In-house audio and video service charges

Insurance

Interest on loans

Land tax

Lease document expenses

Legal expenses

Mortgage discharge expenses

Pest control

Property agent’s fees and commissions

Quantity surveyor’s fees

Repairs and maintenance

Secretarial and bookkeeping fees

Security patrol fees

Servicing costs e.g. water heater

Stationery and postage

Telephone calls  

Tax preparation expenses

Travel and car expenses

Water charges

 

Longer-term deductions

There are expenses you incur on your rental property that you can claim tax deductions for over a number of income years. These deductions fall into the following categories: 

  • Borrowing expenses.
  • Depreciating assets.
  • Capital works deductions.

Borrowing expenses

Borrowing expenses are expenses directly incurred from taking out a loan on your property. It includes loan establishment fees, title search fees and costs for preparing and filing mortgage documents. 

Also included are costs that you incur based on your lender’s requirements e.g. lender’s mortgage insurance. 

Borrowing expenses do not include interest expenses or insurance policy premiums. 

Depreciating assets

The Australian Tax Office (ATO) states that you are entitled to deduct an amount equal to the decline in value for an income year of a depreciating asset that you held for any time during the year. 

Examples of depreciating assets include: 

  • Floor carpets depreciated over 10 years.
  • Window curtains depreciated over six years.
  • Solar powered generating systems depreciated over 20 years.

Capital works deductions

Capital works deductions refer to certain kinds of construction expenditure. These deductions would generally be spread over a 25 or 40 year period. 

Capital works deductions would include things like; 

  • a building or an extension
  • alterations to the property, e.g. removing or adding an internal wall
  • structural improvements to the property

You are unable to claim capital works deductions until construction is complete, and your total capital works deductions cannot exceed the construction expenditure. You may also only claim deductions for the period during the financial year that your property is rented or available for rent. 

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