RSM Australia

What are the top five tax deductions for rental properties?

For the many people who own and rent out a residential investment property, here is a list of the top five tax deductions to ensure that you are maximising the tax benefits of investment property ownership.

1.  Depreciation and Capital Works 

Any assets purchased or included in a rental property are not fully deductible in the year in which you pay for them. Rather, depending on the type and value of the asset you can claim the deductions over a number of years. Examples of assets to be depreciated include carpets, blinds and air-conditioners. Additionally, the cost of constructing the building and fencing may also be available as a deduction over time, even if you were not the owner at the time of construction.

Rental property owners should engage a quantity surveyor to prepare a report outlining all available depreciation and capital works deductions to maximise their tax deductions. RSM can arrange the preparation of this report on your behalf.

2.  Interest 

Interest is usually a rental property owner's single biggest deductible expense.  This deduction available extend to interest payments on loans used to both acquire or improve the rental property. The interest deduction must be split however if part of the loan relates to private purposes.

3.  Repairs and Maintenance 

The cost of repairs or replacements to a rental property (provided they are not improvements) are fully deductible. Examples of repairs include repainting, fixing broken windows, appliances or plumbing. General maintenance costs such as gardening and pest control are also deductible.

4.   Travel

Rental property owners are entitled to a tax deduction whenever they travel to inspect their rental property. This can be extended to overseas or interstate rental properties, but some apportionment of expenses will be required if part of the purpose of travel is for a holiday.

5.  Other Deductions 

Real estate agent fees, cost of preparing lease agreements, body corporate charges, insurance, bank fees, council and water rates are all available deductions rental property owners should be claiming. The key to maximising the tax benefits is keeping excellent records of all payments made in relation to your rental property.


Want to learn more or have a question, contact your local RSM team to speak to an expert.

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