Tax time for landlords: Are you claiming these rental property expenses?

Guilty of leaving your tax lodgement to the last minute? 

Perhaps you’re already resisting the urge to bury your head under piles of crumpled receipts – and that’s without the complication of new tax allowances under Covid-19, casting an added layer of doubt over every deduction this year. 

But with EOFY right around the corner, right now is the time to start gathering that paperwork if you plan on taking advantage of the deductions – and for landlords, it might also be the best chance to invest in your asset and ensure that it provides good returns in the long run.

Landlords who are planning to allocate funds to their investment property should consider speaking to an accountant first, before jumping into an EOFY sale (and blowing the budget!). While it’s easy to get carried away with maintenance and renos, the aim is to invest in the aspects of your property that are ripe for improvement, and guaranteed to yield a higher rental return. 

I’m a landlord; what can I claim?

According to the ATO, rental property owners can only claim a deduction for expenses if they actually incur them and they are not paid by the tenant. Deductions that can be claimed include:

  • Council rates
  • Water charges
  • Land tax
  • Body corporate fees and charges
  • Cleaning
  • Gardening and lawn mowing
  • Pest control
  • Insurance (building, contents, public liability)
  • Interest expenses
  • Pre-paid expenses
  • Advertising for tenants
  • Property agent’s fees and commissions
  • Repairs and maintenance
  • Some legal expenses. 

While you can spend as little or as much as you want, the key is to check each of these in relation to your rental property – as well as to understand how each is defined by the ATO.

For instance, repairs and maintenance are only expenses that directly relate to wear and tear incurred by renting out your property – defects, damage or deterioration, generally speaking. So you could claim a deduction on expenses such as:

  • Replacing a broken window
  • Fixing guttering damaged in a storm
  • Replacing a fence damaged by a tree branch
  • Changing electrical appliances or machinery
  • Fixing faded or damaged interior walls
  • Oiling a deck or cleaning a pool
  • Maintaining plumbing

When it comes to improvements, it’s important to know that you cannot claim a deduction for the total cost of an improvement to your rental property in the year that you incur it. 

Improvements are items that make an aspect of the property more valuable or desirable, such as capital improvements (e.g. remodelling a bathroom or adding a pergola – for a full list, see here).

If you have the support of a property-savvy accountant (if not, it might be time to invest in one!), be sure to ask them about prepaid expenses too. The cost of employing a property manager is tax deductible – so why not opt for the best agent, rather than the cheapest?