Rental Property Tax Tips from MDB Taxation and Business Advisors
If you own a rental property, you may be able to claim tax deductions for the expenses related to renting it out. However, there are some rules and conditions you need to follow to maximise your tax benefits and avoid penalties. Here are some helpful tips from MDB Taxation and Business Advisors, your trusted tax agents and experts in preparing individual tax returns.
What expenses can you claim?
You can claim the expenses that are directly related to renting out your property or making it available for rent. These include
- Administration and maintenance costs, such as loan interest, property management fees, advertising fees, strata fees, land tax, council rates, gardening, pest control, repairs, and insurance. You can claim these expenses in full in the year you incur them.
- Depreciation of the building and its fixtures and fittings, such as carpets, stoves, and hot water heaters. You can claim a portion of these expenses each year over the effective life of the asset.
- Travel expenses for inspecting, maintaining, or collecting rent for the property. You can claim the actual costs or a set rate per kilometre depending on your method of travel.
- Bookkeeping or accounting fees for preparing your rental income and expenses records. You can claim these fees in full in the year you incur them.
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What expenses can’t you claim?
You can’t claim the expenses that are not directly related to renting out your property or making it available for rent. These include
- Purchase and sale costs, such as the purchase price, conveyancing fees, advertising costs, and stamp duty on the title transfer. These costs are not deductible but are added to the cost base of the property, which reduces your capital gains tax when you sell the property.
- Expenses that are paid by your tenants, such as water or electricity charges. You can’t claim these expenses as they are not your income or loss.
- GST credits for anything you buy to rent out the property. Residential rental properties are exempt from GST, so you can’t claim any GST credits for them. However, you can claim the full amount of the expense (including GST if applicable) as a deduction.
When is your property available for rent?
You can only claim the expenses for the period when your property is rented out or genuinely available for rent. This means that
- The property is advertised widely and effectively to potential tenants
- The property is in a condition and location that attracts reasonable rental demand
- The property is not used for your own or your family’s personal purposes
If your property is not rented out or genuinely available for rent for part of the year, you need to apportion your expenses accordingly. For example, if you use your holiday home for yourself for two months of the year and rent it out for the rest of the year, you can only claim 10/12 of your annual expenses as deductions.
How can MDB Taxation and Business Advisors help?
At MDB Taxation and Business Advisors, we have extensive experience and knowledge in preparing individual tax returns for rental property owners. We can help you
- Identify and maximise your deductible expenses
- Keep accurate and complete records of your rental income and expenses
- Lodge your tax return on time and correctly
- Deal with any queries or audits from the Australian Taxation Office
Don’t let your rental property tax stress you out. Contact MDB Taxation and Business Advisors today on 03 9349 1488 and let us take care of it for you.