What tax deductions are available to property investors?
Investing in property is a popular way for Australians to build their wealth and achieve financial security. However, it's important to understand the tax implications of property investment in order to maximise your returns. One of the benefits of investing in property is the ability to claim various tax deductions. In this blog post, we will discuss the tax deductions available to property investors in Australia.
Interest on loans
The interest on loans used to purchase an investment property is tax-deductible. This includes interest on the mortgage as well as any other loans used for the property, such as a construction loan or a loan for renovations. However, if the loan is used for personal purposes, such as buying a car or paying for a holiday, then the interest is not tax-deductible.
Depreciation
Depreciation refers to the decrease in value of an asset over time. Property investors can claim tax deductions for the depreciation of their investment property. This includes both the building and any fixtures and fittings, such as carpets, blinds, and ovens. A qualified quantity surveyor can provide a depreciation schedule that outlines the value of each asset and the expected lifespan. This will enable the investor to claim the maximum amount of tax deductions each year.
Repairs and maintenance
Any expenses incurred for repairs and maintenance of an investment property are tax-deductible. This includes painting, plumbing, and electrical repairs. However, it's important to note that renovations and improvements are not tax-deductible. For example, adding a new bathroom or kitchen is considered an improvement and is not tax-deductible. It's important to keep accurate records of all repairs and maintenance expenses, including invoices and receipts.
Property management fees
If you engage the services of a property manager to manage your investment property, their fees are tax-deductible. This includes any advertising costs associated with finding a tenant and their ongoing management fees. The property manager will provide you with a statement of their fees at the end of the financial year.
Insurance
Any insurance premiums associated with an investment property, such as landlord insurance or building insurance, are tax-deductible. It's important to keep accurate records of all insurance premiums paid.
