Tax Time Tips for Residential Landlords

We recently touched on tax tips for commercial property investors, but what about for landlords in the residential property market? The deductions you can claim are similar between both markets, but it’s important to understand what deductions you can claim immediately and what you’ll receive over time.

Take Advantage of Immediate Deductions

For landlords, there are a number of immediate deductions available to claim (if eligible):

• Any interest on loans used to purchase, renovate, or maintain property are tax deductible (any personal portions of the loan are not)
• Council rates and land tax
• Building and landlord insurance
• Utility bills paid by you
• Property management fees (includes any advertising costs used to attract tenants)
• Any expenses for repairs and maintenance (does not include capital improvements)

Some Deductions Take Time

Some expenses must be claimed over time, such as:

• Capital works deductions for construction and structural improvements (typically 2.5% per year over 40 years)
• Depreciation of assets like appliances, provided they are new
• Borrowing expenses such as loan establishment fees or mortgage broker costs can also be claimed over five years or the term of the loan, depending on which is shorter

Check Before You Claim

The most common mistakes occur when landlords attempt to claim an immediate deduction when not eligible. Often it comes down to whether something is considered a capital works improvement; the structural or fixed improvements made to a rental property.

For example, landlords often try to claim the cost of fixing up a property right after buying it. However, if the damage or deterioration existed at the time of purchase, it’s considered a capital improvement.

Renovations such as installing a new kitchen or adding a deck are considered capital works improvements and can’t be classed as repairs and claimed immediately.

There’s no better time to review your portfolio and your options.

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Disclaimer: This article is for general information purposes only and does not constitute financial, tax, or legal advice. You should seek independent advice from a qualified professional to assess your specific circumstances before making any decisions related to taxation or property investment.