Changes to allowable tax deductions for investors
In the 2017-2018 Federal Budget handed down by Treasurer Scott Morrison on the 9th of May 2017, the Government proposed changes to the Taxation Laws. From 1 July this year, all travel deduction relating to inspecting, maintaining or collecting rent for a rental property – previously allowable – will be disallowed. This is relevant for all investors’ tax returns next financial year.
There are still many allowable tax deductions - costs that are incurred as the owner of an investment including interest on an investment loan, property management fees, property repairs and maintenance, depreciation on certain items and council rates. For a full list, see the Australian Tax Office (ATO) website.
And as a reminder, here is a list of other expenses property investors are unable to claim according to the ATO:
•expenses not actually paid by you, such as water or electricity charges paid by your tenants
•acquisition and disposal costs, including the purchase cost, conveyancing and advertising costs and stamp duty on the title transfer – instead, these are usually included in the property's cost base, which would reduce any capital gains tax when you sell the property
•GST credits for anything you purchase to lease the premises – GST doesn't apply to residential rental properties. However, when claiming the expense as a deduction, you claim the total amount you've paid (inclusive of GST, if applicable).
If you are unsure about what you can and cannot claim, we strongly suggest engaging the services of a professional tax accountant who can guide you through the process and ensure your return is correct. You can also read more from the ATO.