Are you a property investor looking to maximise your returns? Look no further! We’ve got the ultimate guide to tax deductions specifically tailored for you.  

In this blog, we will cover everything you need to know about tax deductions for property investors. So, buckle up and get ready to unlock your wealth potential! 

Tax Deductions: Your Secret Weapon to Wealth Creation 

As a property investor, you have access to a range of tax deductions that can significantly reduce your taxable income, increase your cash flow, and ultimately boost your wealth. The key is to know what you can claim and how to do it correctly.  

With this guide, you’ll be well on your way to maximising your tax benefits and growing your property investment portfolio. 

What Expenses are Tax Deductible? 

  • Advertising for tenants 
  • Agent Management Fees 
  • Amortisation of borrowing costs over 5 years 
  • Bank fees on investment loan or rent account 
  • Body Corporate fees 
  • Building write-off on construction costs 
  • Cleaning 
  • Council Rates 
  • Depreciation on plant and equipment  
  • Gardening 
  • Insurances  
  • Interest on your investment loan  
  • Letting Fees 
  • Pest control 
  • Property management fees  
  • Repairs and maintenance 
  • Water Rates 

Let’s delve more in to some of these… 

Depreciation: The Silent Wealth Builder 

One of the most significant tax deductions for property investors is depreciation. This is the natural wear and tear of your investment property and its assets over time. By claiming depreciation, you can reduce your taxable income and increase your cash flow. 

There are two types of depreciation you can claim: 

  • Capital works deductions: This covers the building’s structure and any fixed assets, such as the roof, walls, and plumbing. You can claim capital works deductions for up to 40 years from the construction date. 
  • Plant and equipment deductions: This covers removable assets, such as appliances, carpets, and blinds. The depreciation rate for these items varies depending on their effective life. 

To claim depreciation, you’ll need a depreciation schedule prepared by a qualified quantity surveyor. This schedule outlines the deductions you can claim for your property and its assets over time. 

Ensure you have a tax depreciation schedule for each of your investment properties and remember to provide this to your accountant at tax time.  

Interest Expenses: Boost Your Cash Flow 

As a property investor, you can claim the interest on your investment loan as a tax deduction. This can significantly reduce your taxable income and improve your cash flow. To claim this deduction, ensure that your loan is solely for investment purposes and keep accurate records of your interest expenses. 

Property Management Fees: Deduct and Delegate 

If you engage a property manager to manage your investment property, their fees are tax-deductible. This includes any commissions, advertising costs, and administrative fees. By claiming these deductions, you can reduce your taxable income and offset the cost of professional property management. 

Maintenance and Repairs: Keep Your Property in Top Shape 

As a property investor, you can claim tax deductions for maintenance and repair costs. This includes any expenses incurred to keep your property in good working order, such as plumbing, electrical, and pest control services. By claiming these deductions, you can offset the cost of maintaining your investment property and ensure it remains attractive to tenants. 

The Bottom Line: Knowledge Is Power 

By understanding and claiming the available tax deductions for property investors, you can significantly reduce your taxable income, boost your cash flow, and grow your wealth. The key is to stay informed, keep accurate records, and seek professional advice when needed. 

A reminder… Don’t Wait Months to Submit Your Tax Return 

Many don’t prioritise submitting their tax return, wasting the opportunity to have their tax return refund sitting against their home loan reducing the interest on their mortgage. It’s a real shame not to utilise this money as quickly as possible.  

Savvy investors have their paperwork ready to go within the first few weeks of the new financial year.  

I simply create a folder with sub folders titled investment property #1, investment property #2 etc and save all relevant info: 

  • Financial Year Statement from property manager 
  • Mortgage statement reflecting interest paid for the year on mortgage 
  • Receipts for any expenses including insurance policy, maintenance, water and rates notices (I also record these on a spreadsheet for ease) 
  • Depreciation schedule 

I then share the link with my accountant, and he has everything he needs digitally, with clear descriptions to avoid any confusion and time wasted too’ing and fro’ing.  

I then put my tax return amount into my offset account against my home. 

An offset account is an everyday bank account that’s linked to your home loan. You can deposit your salary and savings into the account and the balance is then offset against the amount owing on your home loan. #savingmoney 

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Reach out to Leonie at leonie@wealthology.com.au for expert guidance on maximising your tax benefits as a property investor.