Whether you’re a new landlord or have been in the property market for a while, understanding the tax deductions available to you can help you to maximise your return on investment and save money on your tax bill.
Before we dive into the potential tax deductions, it’s important to note that every individual’s financial circumstances are different, and the information provided in this blog is for general guidance only. To determine your eligibility for tax deductions and to maximise your deductions, it’s recommended you consult with a registered tax agent or accountant.
But first, what is negative gearing?
If the rental income you receive is less than the expenses associated with owning and managing that property, your property is said to be ‘negatively geared’. In this instance, you may be able to claim a deduction for the full amount of rental expenses against your rental and other income – such as salary, wages or business income.
Here are some of the common tax deductions available to landlords in NSW:
Interest on investment loans
If you have taken out a loan to purchase your investment property, you may be able to claim the interest on that loan, or a portion of it, as a tax deduction. To claim this deduction, you must be able to prove that the loan was used to purchase the investment property and the property must be rented, or available for rent.
Council Rates, Body Corporate Fees, and Water Rates
As a landlord, you are responsible for paying the council rates, body corporate fees and charges, and water rates associated with your investment property. Fortunately, these expenses can be claimed as tax deductions, as long as you can provide evidence of the expenses incurred, such as receipts or invoices.
Agent’s fees
You’re entitled to claim deductions on your agent’s fees and commission that relate to the management of your rental property. This can include fees for services such as finding tenants, managing your property, handling rental payments and the cost of advertising your property to attract new tenants.
Repairs and Maintenance
It can be painful when an unexpected request for repairs or maintenance comes through, but did you know that these expenses can be claimed as tax deductions? This can include the cost of hiring professionals to carry out repairs, as well as the cost of any materials used. Importantly, completing maintenance will help your home maintain its value, as allowing it to become run-down will negatively affect its value and appeal to prospective tenants. However, it’s important to note that you cannot claim deductions for improvements or renovations, as these are considered capital works and must be claimed over a period of time.
Depreciation of Assets
If you have invested in assets for your investment property, such as floating timber flooring, carpets, furniture or appliances, you may be able to claim deductions for the depreciation of these. This depreciation can be claimed over the useful life of the asset, which can vary depending on the asset. To claim this, you must be able to provide evidence of the purchase and the depreciation schedule, which is prepared by a Quantity Surveyor. Often, a quantity surveyor will prepare a depreciation schedule at the time of purchase, or your managing agent can help organise one for you.
Other expenses
You may be able to claim a range of other expenses, provided they are not paid by the tenant. This may include advertising for tenants, land tax, cleaning, gardening and lawn mowing, pest control, insurance, and legal expenses.
Can I claim on travel expenses?
While you used to be able to claim on rental property travel expenses, this rule has now changed. You can no longer claim any deductions for the cost of travel you incur relating to your residential rental property unless you are either in the business of letting rental properties or an excluded entity such as a corporate tax entity or public trust unit.
As a landlord in NSW, there are several tax deductions that may be available to help reduce your tax bill and increase your return on investment. However, make sure to keep accurate records of all expenses incurred and consult with your accountant to determine your eligibility and to maximise your deductions. It’s important to also keep in mind that the rules around tax deductions can change, so it’s essential to stay up-to-date with the latest tax laws and regulations.
Need help?
If you own (or are about to buy) an investment property and would like to speak with an experienced property professional, our four offices have experts on hand to assist you. Simply call today for a friendly chat and a listening ear.
- CAMPBELLTOWN: 02 4628 0033
- LIVERPOOL: 02 9822 5999
- MACQUARIE FIELDS: 02 9605 5333
- NARELLAN: 02 4624 4400
Information referred to in this article was obtained from publicly accessible sources from the Australian Tax Office. The information provided in this blog post is for general guidance only and should not be taken as personal advice. We do not accept any liability for any errors or omissions.
Prudential Real Estate Campbelltown | (02) 4628 0033 | campbelltown@prudential.com.au
Prudential Real Estate Liverpool | (02) 9822 5999 | liverpool@prudential.com.au
Prudential Real Estate Macquarie Fields | (02) 9605 5333 | macquariefields@prudential.com.au
Prudential Real Estate Narellan | (02) 4624 4400 | narellan@prudential.com.au
