The following link from the Australian Tax Office contains information about rental property deductions:

http://www.ato.gov.au/content/downlo...7n17290609.pdf

Our experience is that the following areas are currently overlooked:

a) Initial Repairs

When acquiring a run down property, care needs to be taken to ensure you are not incorrectly claiming repairs. These items are generally deemed to be intial repairs and classified as capital expenses.

b) Holiday House

If you have acquired a property that you use occasionally for private purposes, you need to ensure that you apportion the expenses of that property.

c) Rent less than Market

If you rent to relatives or friends, you must ensure that market rent is levied, otherwise there may be a claw back of deductible expenses.

d) Jointly held property

If you own a property jointly or as tennants in common, you must apportion the expenses in relation to the ownership. Likewise, income must be apportioned based on the ownership percentage.

e) Mortgage drawdown

If you draw down on your mortgage to acquire a personal asset, a portion of the interest will no longer be tax deductible.

f) Capital vs Repairs

Care needs to be taken to ensure that you are correctly classify repairs. If the item is not a repair it can usually be depreciated over the assets effective life. This is one area the Tax Office often focus on due to the size of tax deductions. Certain rules enable you to claim expenses where the property is no longer rented (refer Example 12 of ATO link)

g) Certain Special Levies

If the body corporate requires you to make payments to a special purpose fund to pay particular capital expenditure, these levies are not deductible.

h) Capital Works Deductions

Did you realise you may be entitled to claim a building write off. A building write of is a capital allowance based on the cost of building the investment property.


Summary of general expenses for which you may be entitled to an immediate deduction in the income year you incur the expense include:

n advertising for tenants
n bank charges
n body corporate fees and charges
n cleaning
n council rates
n electricity and gas
n gardening and lawn mowing
n in-house audio/video service charges
n insurance
– building
– contents
– public liability
n interest on loans
n land tax
n lease document expenses
– preparation
– registration
– stamp duty
n legal expenses (excluding acquisition costs and borrowing costs)
n mortgage discharge expenses
n pest control
n property agent’s fees and commission
n quantity surveyor’s fees
n repairs and maintenance
n secretarial and bookkeeping fees
n security patrol fees
n servicing costs – for example, servicing a water heater
n stationery and postage
n telephone calls and rental
n tax-related expenses
n travel and car expenses
– rent collection
– inspection of property
– maintenance of property
n water charges.

You can claim a deduction for these expenses only if you actually incur them and they are not paid by the tenant.

The list above assumes the property is rented during the period at arms length or made available for rent.


Please note the information contained on this website is general in nature and should not be relied upon as tax advice. If you have a question please contact Sean Urquhart on 02 8264 0755.