21 Investment Property Tax Deductions – What You Can (and Should!) Be Claiming

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Deductible Expenses for Landlords and Investors

As a property investor, your goals are simple.

Strong cash flow, impressive growth, and long-term wealth for you and your family. Yet, every year, countless ambitious and hardworking property owners are missing out on readily available cash savings … simply because they’re unaware of everything they can legally claim.

By applying legitimate and eligible investment property tax deductions, you can supercharge your property’s return … and knowledge of these entitlements is the first step to your success.

Washington Brown gives you that understanding … and turns it into real-world results.

With our deep expertise in depreciation schedules and deductible property expenses, we can help investors like you stay compliant with the ATO, and hold onto more of that income you’ve rightfully earned.

Unsure What You Can Claim? Ask Us!

How Investment and Rental Property Tax Deductions Work

In short, they lower your taxable income, and therefore, you pay less tax … meaning you keep hold of more money.

A Simplified Example:

Let’s say your annual income is $200,000.
At an average tax rate of 30%, you’d pay $60,000 in tax.

But, if you’re eligible to claim $30,000 in tax deductions (such as depreciation, loan interest, and more):

Your taxable income falls down to $170,000.
And your tax payable at 30% becomes $51,000.

The Result:

You would save $9,000 in tax … just by claiming allowable investment property expenses.

(Please bear in mind that this is a highly simplified example. In Australia, tax rates are progressive, not flat, i.e. you pay different rates in different thresholds and can take advantage of an initial tax-free amount.)

Investment Property Tax Deductions –
What They Are, and When You Can Claim

Generally speaking, property tax deductions are the costs you can apply against your investment’s returns, lowering your taxable income. But … and here’s the very important disclaimer … not all of your building’s expenses can be used.

For a Deduction To Be Allowable, It Must Be:

Directly incurred through generating rental income.
Considered an allowable deduction as outlined in Australian law.
Documented thoroughly with proof in reports, receipts, or invoices.
Investment property related, not connected to your private or personal interests.

Furthermore, when these deductions can be claimed, and to what extent, depends on the deduction type.

Deductions and Timing

Revenue expenses (immediate expenses) – things like loan interest and management fees … i.e. costs from day-to-day running … can be applied in the same financial year that they’re incurred and in full.
Capital expenses – such as depreciation on your building’s structure or its removable assets (like air conditioners), proportions of these non-cash expenses can be applied over many years.
Timing – most property tax deductions can only be utilised when the property is rented, or, it’s genuinely available for rent.

21 of the Greatest, Cost-Effective (and Allowable!) Rental Property Expenses

#1. Depreciation

Undoubtedly, the most powerful, practical, and long-term deduction available to investors. It allows you to claim the wear and tear on your property, not once, but over many years. Furthermore, it’s a non-cash deduction, meaning once the initial assets are purchased, you don’t have to outlay money every year to claim it.

Depreciation is split into two main categories:

Division 40 (Plant & Equipment) – that’s ovens, fridges, air conditioning units, carpets, and hot water systems, etc. Essentially, assets that are mechanical or easily removable from the property.
Division 43 (Capital Works) – this concerns the structural parts of your property, such as its walls, roof, bathroom tiles, and other improvements.

Washington Brown can create a depreciation schedule for you. After scrutinising your property, we craft a detailed report that maximises what you can legally claim, as tax deductions, due to your assets’ declining values over their lives.

See What You Could Claim in Depreciation!

#2. Depreciation Schedule Costs

To obtain your depreciation schedule … crucial so you know what you can claim … you pay a specialist such as Washington Brown. In the year in which you have it prepared, you can deduct 100 percent of its cost against your taxable income.

And, it gets even better! At Washington Brown, we’re so confident that we can find substantial tax savings, that if you don’t receive twice our fee in deductions, your depreciation report is FREE!

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#3. Property Loan Interest

Unfortunately, the principal part of your loan (the part you pay every month to repay your debt) isn’t deductible. However, any interest you pay on top of the principal (basically, the price you pay to borrow) can be claimed against tax.

#4. Additional Borrowing Expenses

Getting a loan for your investment property virtually always comes at a price. Typically, expenses include fees for loan applications, mortgage registrations, and title search fees.

These fees, in line with ATO guidelines, can be claimed as a deduction over five years … or the term of the loan … depending on which one is shorter.

#5. Property Management Costs

In many cases, investors engage a property manager or real estate agent to handle the day-to-day tasks … from leasing the property and collecting rent to dealing with maintenance issues. The fees you pay for this service are fully tax-deductible.

#6. Advertising for New Tenants

If you advertise your property for rent in the newspaper, online, or create some street signage … costs are incurred. Not only are these expenses allowable as deductions, the very act of advertising shows the ATO that your building is truly available for rent … a requirement for claiming deductions.

#7. Pest Control

Pests such as termites, rats, mice, and wasps are one of the unwanted certainties of owning a property in Australia. Paying a pest control expert … whether to immediately get rid of an infestation or provide ongoing prevention treatments … is an allowable deduction.

#8. Water and Council Expenses

Necessary costs like council rates, water supply expenses, and sewerage fees can be claimed against tax. Bear in mind, this is only if you’re paying these personally, you cannot deduct them if your tenant covers these expenses.

#9. Insurance

Disasters can strike without warning, so insurance is essential to protect both your property and your livelihood. The good news? Premiums for building and contents insurance, public liability, and landlord insurance are generally tax-deductible.

#10. Maintenance and Repairs

Expenses related to maintenance and repairs … such as replacing a broken window, or replastering a cracked wall … can be deducted immediately. But, if the actions improve or you replace something in its entirety, that’s Capital Works (Division 43) and must be depreciated over 40 years.

Unsure if It’s a Repair or Improvement? Ask Us!

#11. Gardening

Whether you’re tidying up the garden and yard areas after a tenant leaves, or providing ongoing grass cutting or maintenance, you can claim the deductions immediately. But, if the work edges into the realms of landscaping, that’s a Division 43 deduction, and therefore depreciated over time.

#12. Land Tax

So, is land tax deductible? Yes, but the rules are complicated. It’s primarily affected by what ownership structure you use, whether there are other properties involved in a group format, and where the property is located. It’s best to consult a professional adviser for tailored advice.

#13. Banking Fees

Hopefully, your investment property is generating significant income … and you have to keep that hard-earned cash safe somewhere. Thankfully, banking fees for your investment property can be claimed against tax.

#14. Tenant-Related Legal Expenses

Ideally, your tenants will care for the property and pay the rent on time … but, things don’t always run smoothly. You can claim deductions for legal fees that relate directly to tenants … such as recovering rent or pursuing an eviction. However, legal costs associated with buying or selling the property are not deductible.

#15. Property Cleaning

Whether it’s Marie Kondo or Louisa May Alcott, experts agree that a clean home is a happy home. If you provide scheduled cleaning as part of your tenant’s rental agreement, or you simply tidy up your investment property in between tenants, the cleaning cost can be claimed.

#16. Phone and Stationery

Undoubtedly, you’re going to use a phone, stationery, and the internet to manage your rental property. Under ATO rules, you’re allowed to claim a portion of these expenses … as it’s unlikely your mobile and favourite pen are used solely for your investment.

#17. Travel Expenses

In 2017, property investors experienced major changes in allowable deductions. Not only did legislation change that affected Plant & Equipment depreciation, but also impacted on travel expenses.

Since that date, a residential property owner cannot claim for travel to maintain or inspect their property. However, this restriction doesn’t apply to commercial properties, or if the property is owned by a company or trust … as those entities can still claim the deduction.

#18. Security

If you provide regular security patrols for your property or third-party alarm monitoring, you can claim the costs as a deduction. In the long term, this can help defend your valuable investment from vandalism and theft.

#19. Tax Agent or Accountant

Ideally, you should have a tax agent or accountant, as they have the knowledge to inform you exactly what deductions you can apply to your investment property. And, the portion of their fees that are directly related to managing or lodging your tax return for your investment property, is deductible.

#20. Body Corporate Fees

If you’re wondering, are strata fees tax deductible? The answer is yes! Costs that you incur to address the maintenance, administration, or insurance of the building’s common areas are deductible. However, that could be in full or in part, depending on whether they’re considered immediate expenses, or are related to Capital Works.

#21.Seminars

If you go to a seminar that directly addresses how to run or improve the return on your currently owned investment properties, then the cost is deductible. But, if you went to the seminar before you bought a property, or the seminar is irrelevant to your situation, you cannot claim.

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Pro Tip – Don’t Do Anything Without Professional Advice!

The 21 deductible expenses for investors listed above could help you maximise your tax efficiencies, but remember, this is a general information guide only … and should not be taken as direct advice!

Your eligibility to claim these deductions depends on a multitude of factors … including your property ownership structure, changes or amendments to ATO rules, your property type, how it’s used, and your personal circumstances.

Therefore, to ensure the correct guidance and to prevent costly mistakes, always speak to a qualified tax adviser or accountant.

And, for your depreciation? You must speak to Washington Brown.

Our depreciation schedule specialists will ensure you take advantage of every possible Capital Works and Plant & Equipment deduction. And as registered tax agents, you’re assured the highest standards in compliance and professionalism.

What You Need To Claim Your Deductions

Just one thing … evidence.

The ATO is strict: to claim tax breaks on your investment property, you must provide genuine documentation. This means comprehensive record keeping … of your invoices, receipts, bank statements, and construction work records.

And for the most important deductions of all, the wear and tear on your assets, you require a depreciation schedule.

Expertly prepared by a depreciation schedule specialist like Washington Brown, it brings ongoing savings year on year. And, it must be updated whenever you add or replace a major asset, or complete renovation or improvement works.

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Make Every Single Dollar Matter … With Washington Brown

Being a serious, savvy property investor isn’t just about buying the right property, in the right location, and at the right price…

…it’s also about making every dollar count.

Too many landlords and investors give much more than they should to the tax office every single year, just because they don’t understand what deductions are allowed or how these expenses should be applied. And that’s lost cash that could be used for cash flow, reinvestment, or indeed pleasure.

But, by applying the full smorgasbord of allowable deductions … from loan interest and repairs … you take yourself to the next investor level. And when it comes to the most significant deductions … depreciation … that’s where the real, long-term, portfolio-building savings appear.

Washington Brown is Australia’s depreciation schedule specialist. With over 45 years of experience, we can help investors like you release thousands in eligible claims by preparing ATO-compliant, tailored reports that maximise deductions and minimise tax.

Ready To Unlock Thousands From Investment Property Tax Deductions? Get Your Quote NOW