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What landlords need to know about tax deductions

TaxInvesting in rental properties can be one of the most lucrative ventures available and the chances are that this is one of the key reasons that you’ve decided on it in the first place.

It does, however, take a high level of financial stability and control to be successful in the rental property market. If you aren’t watertight on your finances, you won’t be able to get the best from your business.

Additionally, with the ATO clueing-up on AirBnb and stating that they’ll be looking closer at rental properties as a result, it’s essential that you’re claiming all applicable tax deductions as a landlord to ensure that you’re making the most of your financial situation.

In this article below, we’re going to lay out the primary elements you need to understand about claiming tax deductions as a rental property owner, as well as the areas you can capitalise on.

Interest rates

As a general rule of thumb, you’re able to claim deductions on any interest that’s spent on activities pertaining to your business. As a landlord, this is usually counted towards interest on credit cards used for your rentals, or mortgage payments for your rental properties. It’s essential that you investigate this area, as it can count as one of the biggest sources for your deductions.

Depreciation of purchases

All of your purchases which you expect to provide value for more than the current tax year but will lose value over this time can be deducted. Some examples of this include a property’s purchase price, as well as appliances and furniture such as sofas, stoves and hot water units. It’s also possible to claim depreciation on a property that’s under 40 years old, but be prepared to produce a quantity surveyor’s report when asked.

Specific property repairs

Many budding landlords set out with the belief that all property repairs are tax deductible, but this sadly just isn’t the case. Any minor repairs that come to less than $300 are deductible, but the costs of any work carried out before the property is rented will likely have to go down as a depreciation cost.

On top of this, any improvements you may wish to make to your rental property to boost its market appeal don’t fall under the category of repairs. If you’re looking to renovate your already fully-functional bathroom to attract more potential renters, this isn’t deductible under the property repairs category.

Keeping clued-up on the ATO’s rules regarding tax deductions will mean that your rental property provides the most value possible. Bear these points in mind and make 2017 as prosperous as possible.