In the present day, purchasing investment or rental property continues to be one of the favourite ways that people prefer for investing. The belief is that investment properties increase our wealth and securing our financial future. However, one must remember to manage their investments efficiently as it will determine whether the investment helps you reach the required financial goals. Every dollar claimed on these types of properties benefits the owner’s financial well-being.

Owning an investment property can cost an owner less than expected especially after taking into account the rental income and the tax deductions that one is entitled to. The more deductions that investors can claim on a property, the higher would be their tax benefit.  

If you are a property investor, it is crucial, claiming as many tax deductions as you are legally entitled to. After all, every dollar that is saved goes towards your overall investment returns and financial wealth. Hence, here are some of the most common tax deductions to help you recognise what you can and cannot claim on your investment property. Let us have a look at what they are.

1. Fees and legal costs

   1. Interest costs- Tax deductions can be claimed on the interest of the investment loan as well as the interest charges associated with buying any new and major item bought for the home, using a credit card. However, one must remember that principal payment is not tax deductible. It is advisable that if you are using a credit card to buy items for your home, then use it solely for that purpose only. Your personal expenditures should be kept separately.

   2. Bank charges- The monthly mortgages that you pay as the owner of a rental property is also tax deductible.

   3. Body corporate fees- These are fees paid on a quarterly basis for maintenance of common areas of the property and is tax deductible too.

   4. Borrowing expenses- When we talk about these expenses, they include payments for loan establishment, title search fees, costs for preparing and filing mortgage documents, and all other expenses incurred for filing for a loan on a property one is investing on.

   5. Insurances- The insurance amount paid for protection against theft by tenants, non-payment or payment default by tenants, building damages, and liability claims are all tax deductible.

   6. Legal fees and costs- These are legal costs associated with eviction of non-paying tenants, terminating leases are all tax deductible. However, the legal cost of buying or selling a property, is not. The later can be included in the capital gains tax calculation.

   7. Mortgage discharge expenses- These are other fees that associated with paying mortgages, like the early repayment fees.

   8. Property agent fees and commissions- You are also eligible to claim tax deductions on the fees that are paid to property agents who are responsible for the maintenance of your property, on your behalf.

   9. Quantity Surveyor Reports Fees- The fees that are paid for a quantity surveyor’s report to evaluate your capital work and depreciating assets can also be claimed as a tax deduction.

2. Miscellaneous Costs

   1. Travel and vehicle costs- If your need to inspect, get repairs done, or maintain your rental property needs you to travel, you may claim the cost of visiting the property.  For doing so keep a record of vehicle’s engine size as well as the number of kilometres you travelled while visiting to and from your rental property. You may also be entitled to claim overnight accommodation and meals if the property is located a long way from home. Just remember to keep all the receipts and try to avoid tagging the entire family along.

   2. Stationery and postage- Small expenses are often overlooked and end building up over time. If you have spent money on stationery or postage relating to your investment property, keep receipts for all the money spent on them so that they may be claimed during the tax time.

   3. Phone calls- If you are making numerous calls relating to your property to various people like the property manager, the pest inspection company, or a trader you hired for some repairs, then they are usually tax deductible. Ensure to keep all receipts and invoices associated with your investment property handy. You will be surprised at what you can claim for.

   4. Advertising for tenants- Advertising expenses for your property, if it is available for renting can be claimed as tax deduction. Advertising costs include the fees paid to local real estate agencies, costs for posting advertisements in newspapers or local publications, and the fees for posting in local shopping centres.

   5. Pest control- Fees paid for fumigation or pest control only on investment properties are generally tax deductible.

   6. Secretaries and bookkeepers- The income you pay to secretaries and bookkeepers who assist you in filing paper works, tracking income and expenses, and other transactions relevant to your investment property are also tax deductible.

   7. Security personnel- If you hire security personnel to keep your investment property  safe, the income paid to them is tax deductible.

   8. Stationery and postage- Often overlooked by most property owners, the expenses you for stationery and postages are also tax deductible, so always keep receipts or records for stationary and postage expenses.

   9. Telephone calls and rentals- Fees for telephone calls and rentals related to running your investment property are tax deductible.

   10. All tax-related expenses- All tax-related fees you pay, including advices from registered tax agents, tax preparation, and accounting are tax deductible. They should just be related to the administration of the investment property.

   11. Travel expenses- Your travel expenses are tax deductible, for as long as these costs are incurred in relation to your investment property, such as collecting rental fees, or inspecting the property you are renting or leasing out. Car expenses can be claimed by recording the size of your vehicle, the number of miles you travelled and the gas consumed while travelling to the investment property each year.

Over to you

When you are out to claim tax deductions on your investment property then as a landowner we need to take care of a lot of things to get maximum benefits. If done correctly, then you can pay less tax to the government and make the most of your hard-earned money.

Always keep in mind to keep a record of all the receipts whether for the big items or small ones. This will save you a lot of time and spare you the hassles of going through all the trouble of claiming the expenses that did not come with the receipts.

If you are not sure about what you can claim tax deductions on or even if you are experienced, get help from a Mortgage Broker. Tax agents will save time and the trouble of filing the tax deductions. They’ll also help in finding ways to get more out of one’s income as well as pay lesser taxes the legal way by finding other expenses or offsets you might be entitled to.

If you know beforehand that there is going to be a large tax-deductible expense, then plan your purchase in a year when you are likely to have a raise. This will decrease your taxable income for that year, and may even push you down into the lower tax bracket.

Just follow the tips above and make a checklist of what can be claimed as tax deductibles and you should be fine earning back what’s yours.