Tax Deduction Guide

What can I claim straight away?

Some expenses may be immediately deductible in the income year in which they are incurred. For example, you may be able to claim an immediate deduction for interest on a loan used to:

  • purchase a rental property
  • purchase land to build a rental property
  • purchase a depreciating asset for the property - such as an air conditioner; or
  • to finance renovations or home improvements, like a deck.

You can claim a deduction for the costs that you pay to repair and maintain your rental property. For example, replacing part of the guttering or windows damaged in a storm; replacing part of a fence damaged by a falling tree branch; or repairing an electrical appliance.

Tenancy costs such as the preparation of a lease agreement, or costs associated with evicting a tenant are also immediately deductible expenses.


What can I claim over a number of years?

You can claim other expenses over a number of years, including the cost of depreciating assets, structural improvements and most borrowing costs.

Assets that are part of the property such as stoves, refrigerators, air conditioning and hot water systems can be claimed over a number of years as a ‘decline in value’ deduction.

You may also be able to claim the cost of building, construction and structural improvements made by you or a previous owner as a capital works deduction, for example adding a room or constructing a retaining wall or fence.

Another example of expenses that need to be claimed over a number of years is borrowing costs such as stamp duty charged on a mortgage, loan establishment fees and title search fees charged by the lender. If these amounts are less than $100 in total they can be deducted immediately. Otherwise, they are generally deductible over five years or over the term of the loan, whichever is less.


Deduction for decline in value of depreciating assets

You can claim a deduction for the decline in value of certain items, known as depreciating assets, that you acquired as part of the purchase of your property or that you subsequently purchased for your property.


What is a depreciating asset?

A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. Examples of depreciating assets are freestanding furniture, stoves, washing machines and television sets.

CLICK HERE to download the Australian Tax Office GUIDE TO DEPRECIATING ASSETS


What cannot be claimed?

Expenses for which you are not able to claim deductions include:

  • acquisition and disposal costs of the property
  • expenses not actually incurred by you, such as water or electricity charges borne 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
  • borrowing expenses or interest on the portion of the loan you use for private purposes like buying a new car.
There are so many small things you can claim for that many investors miss.
The ATO has provided a comprehensive list of immediately deductible expenses – here it is.
  • Advertising for tenants
  • Bank charges
  • Normal body corporate fees
  • Cleaning costs
  • Council rates
  • Gardening and lawn mowing
  • Insurances – building, contents, public liability
  • Interest on loans
  • Land tax 
  • Lease document expenses – preparation, registration, stamp duty
  • Some legal expenses
  • Pest control
  • Property agents’ fees and commissions
  • Quantity surveyors’ fees
  • Some repairs and maintenance costs
  • Bookkeeping fees
  • Servicing costs – eg service to a water heater
  • Stationery and postage
  • Telephone calls 
  • Tax-related expenses 
  • Travel and car expenses 
  • Water charges 
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