Property Investment Tax Benefits

An outline of the investment property tax benefits...

Rental investment property appeals to many Australian investors because it offers a very attractive tax minimisation opportunity through negative gearing. Negative gearing is when your investment costs exceed your annual net income return from the property.

Investment costs include the interest on your investment loan as well as tax deductible expenses associated with property maintenance, including depreciation, repairs and costs associated with rental. These costs are then deducted from your overall income to reduce your income tax costs. The higher your income the more beneficial are the tax benefits.

Tax Benefit - Deductible Expenses

Borrowing Costs

As long as your loan is solely for income producing purposes the largest deductible expense will be the interest cost on your mortgage. Initial borrowing expenses, including mortgage registration, loan establishment and registration fees, as well as stamp duty and title search fees, are also classified as tax deductible investment property expenses.

Maintenance & Depreciation Tax Benefits

Depreciation, in which the cost of an item is written off over a number years, applies to fixtures and fitting such as refrigerators, stoves and furniture are another eligible tax benefit for property investors.

Body Corporate fees payable for the insurance, upkeep and maintenance of your investment apartment or townhouse are eligible deductions. Other expenses such as insurance, land tax, rates, legal expenses, cleaning and gardening are deductible expenses.

Cost of Rental Deductions

The cost of advertising for tenants, agents’ commissions and management fees (usually a percentage of rent) are a claimable tax deduction.

Tax Deduction Check List

• Agent fees or commissions
• Bank fees & charges
• Body corporate fees
• Cleaning & gardening
• Depreciation furniture & fittings
• Interests & other borrowing expenses
• Land tax
• Local council & water rates
• Pest control
• Postage & stationery
• Property repairs & maintenance
• Telecommunications
• Tenant advertising
• Travel in relation to inspections or rental collection