Investment Property Tax Deductions

Investment Property Tax DeductionsMaking sure you get all available tax deductions on an investment property is crucial to maximising the after-tax value of holding and renting an investment property.

And as a very significant part of the national budget, it gets a large share of attention from Tax Office review and audit activities. Avoiding potential penalties for incorrect claims requires close attention to the rules, some of which are very complex.

The Australian Tax Office publishes guidance with information about normal deductions available and the associated substantiation requirements. See the section Expenses you can claim which discusses expenses which are claimable in the same year as incurred, and those for which tax claims must be spread over more than one year.

Multi-year expense claims – prone to error

Watch: Loan interest and depreciation

On a typical investment property, two of the most significant expenses are loan interest and depreciation. The nature of these tax claims are such that they rarely match the cash paid out within a tax year. To maximise legal claims and avoid penalties for error it is important to know how these claims are calculated correctly.

Watch: Repairs and maintenance

Repairs and maintenance claims require careful attention to the definitions and deductibility requirements, and is an area which the Tax Office look at closely when reviewing tax returns. It is crucial to distinguish between repairs which are immediately claimable, those which are a capital expense (and therefore may be claimable over more than one year) and those which are not deductible at all. Sometimes the correct category is not immediately obvious.

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This page was last modified 2018-02-28