Tax Deductions Available for Australian Property Owners

If you own or are investing in property in Australia, you can get tax deductions for some of your costs. This can include mortgage payments, property taxes, and depreciation.

Taking advantage of tax deductions can help you save money on your taxes each year. You can also get more on tax refunds at the end of the financial year.

We will dive below into how tax deductions work and the various tax deductions you can claim.

The Link Between Tax Deductions and Taxable Income

Tax deductions are like pieces of a puzzle that help reduce the taxable income you earn. Each deduction reduces the total amount of income that is taxed, so the more deductions you have, the smaller your taxable income will be.

The total tax you have to pay depends on your tax rate bracket. This rate is the percentage of your taxable income that the government will take away.

Your taxable income is the amount you earn after taking away all the money you’ve claimed in tax deductions.

For example, if you earned $70,000 last year, your tax would be approximately $13200 without any deductions claimed.

However, let’s say you have worked from home, like many other Aussies, since 2020. Your expense for the year for work was $4500. In that case, you can claim those expenses, which reduces your taxable income to $65,500.

Your tax after reassessing would be $11754, which saves almost $1500.

This is just one example of tax deductions helping you save on tax. Let’s find out about other types of tax deductions that specifically apply to Australian property owners.

Rental Property Tax Deductions

We can divide rental property tax deductions into three categories:

Expenses Claimed in The Same Year

Administration and Property Maintenance Fees

Phone and internet used for property management
Advertising costs
Pest Control
Garden and Pool Maintenance
Security Patrol Costs
Property Agent Costs
Account Keeping Costs

Property Fees and Taxes

Body Corporate Fees
Strata Title Fees
Water Rates
Council Rates
Land Tax

Insurance

Building Insurance
Contents Insurance
Public Liability Insurance
Landlords Insurance

Interest on the Mortgage

This is usually the most significant property tax deduction you can claim. Any interest charged on the mortgage you took out for your rental property can be claimed back as a deduction.

However, it is important to note that you can’t claim the interest charged if you have refinanced part of your mortgage for personal purposes.

Expenses Claimed Over Time

Depreciation of the Building and Capital Items

You can claim a depreciation deduction of 2.5% a year for 40 years on properties built after 16 September 1987. Any structural renovation you’ve done after 27 February 1992 also qualifies for a depreciation deduction.

Please note that depreciation can only be claimed for periods the property was rented or available for rent.

In case of capital items you’ve installed, like air conditioners, washing machines, and dishwashers, you can claim depreciation on an asset’s purchase price over the asset’s ‘effective life’.

Other Claims

Loan Setup Fees
Valuation Fees
Broker Fees
Solicitor fees when related to loan

Expenses Claimed After Selling The Property

There are some tax deductions you can claim after selling the property as well, such as:

Sale and Purchase Amounts
Legal Costs for Sale

What If I'm Renting Out Some Rooms Within My Own Property?

The Australian taxation office considers a rental property to be the same as a property with a rented room. Therefore, your tax deductions work the same for you as for the investors renting out the entire property.

If you rent out a room, you can only deduct expenses for the time you’re renting out. If you sell the property, you may have to pay capital gains tax (if you made money from the sale) and pay taxes on your expenses when tax time arrives.

For more information on taxation and property

This overview of most deductions you can claim on your investment property gives you a general picture. However, the devil is always in the details.

At Odin Tax, we specialise in helping Australian property owners claim all the tax deductions they are entitled to. To find out more, get in touch today!