If you have an investment property, it’s time to listen up! There are three key tax deductions that you should be considering carefully this tax time – repairs and maintenance, administration and depreciation. We encourage you to carefully read through the details of each of these tax deductions. Collate a list of relevant costs that apply to your property during the previous financial year.
Repairs and maintenance for your investment property
You have likely needed to fork out extra cash for repairs and maintenance on your property over the past 12 months. As a result, you can claim costs associated with the ‘wear and tear’ of your investment property. This includes the costs of hiring a professional to make the repairs, for instance. However, if you needed to make a full replacement or improvement to the property, these deductions cannot be applied.
You are also able to claim the maintenance of the property garden. Similarly, you cannot claim any improvements to the garden such as additional plants and outdoor structures. If you were required to pay for pest control, you can claim an immediate deduction for the cost of hiring a professional pest controller.
Administration costs for your investment property
Owning an investment property comes with plenty of administration costs. Everything that you use to run your investment property can be deducted from your taxable income. Some examples include:
- Stationary is tax-deductible if used for your investment property
- You can claim bills including phone bills, electricity and gas. Be mindful that you can only claim for the portion that these expenses relate to your investment property.
- Bookkeeping fees associated with the cost of preparing information for your tax return. This cannot include the cost of preparing your personal tax return.
- If applicable, you can claim advertising costs if you were looking for new tenants at some point during the last past financial year. This includes online advertising and printed materials.
- Any legal fees associated with your investment property
Depreciation for your building and appliances
You may be eligible to claim a deduction on the depreciation of your building including renovations. If the property was built before September 1987, you won’t be able to claim depreciation. If it was built after September 1987, you will be able to claim depreciation on these costs at a rate of 2.5% a year for 40 years. For example, if you own a building that was initially built for $500,000 in 2001, you will be able to claim a deduction of $12,500 per year. This will be valid until the year 2041.
You can also claim depreciation on costs for appliances that decline in value over time including dishwashers and air conditioners.
Preparing for tax time
If you have any specific questions about tax deductions for your investment property, the team at APS Tax & Accounting are here to answer all of your questions – big and small! Get in touch here.