Rental Property Deductions – Are You Claiming Yours?

Rental Property Deductions – Are You Claiming Yours?

Rental Property Deductions

With another financial year coming to a close, its time to start thinking about where you put all those receipts you were going to claim?

As an accountant I frequently get asked “What can I claim for my rental property?”

The answer I give is very simple.

If you had to incur an expense in order to earn income on the property it is considered a tax deduction.

Remember in order to claim deductions for your rental property it must be currently rented out or “available for rent”. The only stipulation the ATO has when a property is “available for rent” is that the property is currently being advertised for rent. An exception to this is when a property is still in construction phase and will be rented on completion.

Many investors and accountants are familiar with rental property deductions, so I will cover a few of the less known rental property deductions and expenses you can claim below.

Borrowing Expenses

These are the costs you incur when setting up your mortgage.  These are often forgotten about as they are sometimes included in the setup of your loan.

Examples of these borrowing expenses are Lenders Mortgage Insurance (LMI), loan stamp duty, application fees and valuations.

Theses can be written off over five years or the length of the loan, whichever is smaller.

For example:

If your total borrowing expenses are $15,000 and you incurred them on the 30 September 2013 you will need to apportion them for the first year.

  • Total amount divided by 5 years = $3,000
  • Days remaining in year divided by 365 multiplied by $3,000 = $2,244
  • 2014: (273÷365) × 15000÷5 = $2244
  • 2015: 15000÷5 = $3000
  • 2016: 15000÷5 = $3000
  • 2017: 15000÷5 = $3000
  • 2018: 15000÷5 = $3000
  • 2019: $3000 – $2244 = $756

Capital Works & Allowances

Capital works relates directly to the building and includes construction costs, costs of altering the building and capital improvements.

Capital allowances  relate mostly to furniture, appliances and any other asset you’ve bought for the rental property refer to this handy guide from the ATO for a full list.

In order to maximise the deductions from these two expenses it is highly recommended to get a quantity surveyors report from a qualified quantity surveyor like BMT.

Travel Expenses

Costs incurred to inspect or maintain your rental property may be deductible.

You are also eligible to claim food and accommodation if you need to stay overnight.

Flights are only deductible if the sole purpose of the journey or a significant portion of the trip is rental property related.

For example if you decide to go on a holiday for 10 days and spend 1 day inspecting the property then your travel expenses can be apportioned for that 1 day.

In summary always remember that if you had to incur an expense in order to earn income it is a tax deduction.

Remember the expense may not always be able to be claimed in the year that it is incurred, but may be claimed over a number of years or when the property is sold.



Daniel is a qualified CPA and a partner at accounting firm Mulraneys. He has more than 11 years experience as an accountant and focuses on supporting small to medium sized business, high net worth individuals and property investors. Daniel is a CPA member, a SPAA SMSF Specialist Advisor and a ASIC SMSF Auditor and he has a passion for helping people achieve financial independence.