Rental expenses-
Did you know?
You can claim a deduction for certain expenses you incurred during the period your property is rented or available for rent!
Types of rental expenses include
There are three types of rental expenses available to investment owners;
- Cannot claim deductions
- Can claim immediate deductions in the income year you incur the expenses
- Can claim deductions over many income years
Cannot claim deductions
Within an investment property, there are expenses in which you are not able to claim deductions for.
A few of these include;
- Costs involved in buying and selling the property
- Costs not incurred by you. Eg, water and electricity usage by tenants
- Travel costs to inspect a property before you buy it
- Travel costs to rental seminars
Expenses where you can claim immediate deductions
Some examples of expenses where you may be entitled to an immediate deduction include;
- Cleaning
- Electricity and gas
- Gardening and lawn mowing
- Pest control
- Property agents fees and commissions
- Repairs and maintenance
- Secretarial and bookkeeping fees
Please note, that you can only claim deductions for these expenses if you actually paid the costs and were not paid for by the tenant.
Renting to related parties-
Are different tax rules applicable when renting to family members?
Where a rental property is leased to family or friends of the landlord at market value, there are no exceptions and will be treated no differently for tax purposes.
Even though it is not uncommon for family members who own investment properties to lease their rental for less than market value. Due to this, consideration is given to the extent to which the landlord is permitted to claim deductions for rental property expenses.
However, if it is discovered the rent charged does not constitute assessable income then the rental property expenses are not deductible.
In what circumstances do different rules apply?
In some cases, rental property deductions may be limited when the landlord is found to have a dual purpose in holding the rental property. When this occurs, the rent does represent assessable income, however, the rental expenses are only deductible to the extent the property is held for the purpose of deriving assessable income.
How does apportionment work?
Apportionment usually involves the ATO simply limiting any allowable deductions to be claimed to the extent of the assessable rental income, denying any negative gearing benefits.
About Tyron Hyde
Tyron Hyde is the CEO of Washington Brown Quantity Surveyors. He is regarded as one of the industry's leading experts in property tax depreciation, is regularly quoted in the media & asked to speak at conferences.
Learn why more Property Investors Choose Washington Brown to prepare their depreciation reports.