Own a rental property? Know your tax deductions

Finance experts tell us that the house you buy is a sound investment especially if you rent it out. But there are two other aspects which reduce the financial benefits. The first is the need to carry out regular maintenance expenses. This seems to grow worse as the property ages, this is called depreciation. The value of the property reduces every year due to normal wear and tear. Many house owners do not know, however, that this depreciation can also be to their advantage. Australian tax rules allow for certain tax deductions to be made on account of the allowable depreciation on rental property. This short blog is an attempt to explain the basics of tax deduction rules on account of depreciation of rental property.

Which Expenses on Property Cannot Be Claimed?

Let us get over the bad news first. There are certain expenses which can’t be used to claim a depreciation tax deduction on rental property. Like we mentioned above, the first thing to remember is that if you stay in your property, you are not permitted any deductions. Any costs relating to the sale or purchase of the investment property are not included in the calculations. Also, the costs of servicing any loans taken against the investment property can’t be included. Finally, the monthly utility bills are not considered while preparing the rental property depreciation report.

Which Expenses on a Property can be Claimed?

When you consult an experienced and accredited tax professional, you gain peace of mind. You can be sure that if there are rules for a depreciation tax deduction on a rental property that might benefit you, you will be made aware of it. This includes a host of recurring running expenses related to your property. If you are paying any real estate management fees for the property, they can be included. The annual Council and water rates, the insurance premium, and the monthly interest on the loan you have taken for the investment are all permissible. Your advertisement expenses, as well as travel expenses for site visits, can also be included. Finally, you are also allowed to claim depreciation on household gadgets installed.

A Brief Overview of Capital Gains Tax

If you buy a property for $100 and sell it for anything above $100, you are said to have made a capital gain. If you need to sell at a price below $100 you have made a capital loss. In case you have made a capital gain, then you are liable to pay Capital Gains Tax (CGT) on it. There are ways for you to legitimately reduce that tax amount. This can be done by increasing the cost base by including expenses like stamp duty, broker fees, auctioneer fees, etc.


Whether you wish to get your depreciation schedule for rental property prepared or you want to understand how your CGT liabilities can be reduced, you should employ professionals and experts for the job. This would help you focus on your other activities. It would also ensure you do not miss out on claiming your rightful relief from taxes.

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