Australian Tax Deductions: A Property Investor’s Guide

The world of property investment can be daunting, however, it can be incredibly profitable. Between maintaining your property, ensuring everything is up to code and keeping your tenants happy, there is a lot to think about. Investing in property is expensive and with all of the additional maintenance fees and other costs associated with your property, it’s important to save where you can.

Understanding your obligations when it comes to tax is crucial in ensuring that you don’t incur any penalties and that you claim any tax deductions you might be entitled to. For example, you can use an online tax depreciation calculator to accurately calculate the tax depreciation on your investment property to figure out what you can claim come tax time. With a little more knowledge of how your investment property can impact your tax return, you can ensure that you reduce your taxable income, allowing you to increase your bottom line at the end of the year.

Let’s take a closer look at just some of the tax deductions that you can claim as a property investor.

 
Interest On Your Loans
Any interest you are charged on loans that are used for investment purposes can be claimed as a tax deduction. This can include funds borrowed to buy shares, interest to be paid on an investment property mortgage or any other borrowings related to your investment properties.

Rental-Related Expenses
Operating a rental property means you need to pay a variety of different bills and expenses each month. Many of these expenses can be claimed against your taxable income at the end of each year. Some rental-related expenses that you can claim against include advertising costs, council rates, land taxes, water rates, body corporate fees, insurance, gardening, property repairs, general maintenance, cleaning, pest control and property agent fees, as well as commissions. Travel costs directly related to your rental property for tasks such as collecting rent or property inspections may also be claimed. These costs can add up quickly so it’s important to keep meticulous records of all of your costs.

Building Depreciation
Every building will experience some wear and tear over time. This wear and tear on the property known as ‘depreciation’. If the building you own is used for profit-generating purposes and was built any time after 1985, you can claim depreciation on your tax return, allowing you to make big savings come tax tie without spending any additional money on the property. Depreciation is a tax-deductible that is included in the cost of the property. In fact, depreciation is such a beneficial tax deduction that many seasoned property investors will consider the depreciation before they invest in a property.

 
Holding Costs
If you buy land with plans to build on it, you will need to pay interest on the land and on each phase of the construction project. These costs or necessary for you to ‘hold on’ to the land until you can complete construction and have tenants occupy the building. Together, these costs are known as holding costs and can be claimed against your taxable income. Along with building depreciation, this is one of the highest-impacting tax deductions and it’s important not to overlook this opportunity to save thousands of dollars at tax time.

Understand Your Tax Deductions And Increase Your Bottom Line
Having a good knowledge of all the deductions you can claim as a property investor means paying less tax at the end of the year and more profit for you. With this additional capital, you can reinvest in your existing properties, start building your portfolio or take your investment career in a completely different direction. Take the time to understand your tax deductions and you can be sure that you will reap the rewards come tax time.