5 rental property expenses you didn’t think were deductible

21 Jun 2016

It's nearly the end of the financial year, which means everyone around the country is wringing their hands and trying to put off thinking about their taxes. But like the passage of time, unfortunately our taxes just don't stop because we want them to. As much as we'd love to stay young and tax-free, it's time to face the music – and that goes double if you've bought Melbourne property for investment!

That's because, as a secondary source of income, your investment real estate plays an important role in how you do your taxes. However, it can be in a good way, thanks to deductions you can claim with investment property. Let's look at five costs you might not have thought were deductible. For the half a million people who filed their very first return last year (according to the Australian Taxation Office (ATO), there could be a lot to learn.

Let's take a look at weighing up your home and your taxes. Let's take a look at weighing up your home and your taxes.

1) Borrowing expenses

Have you recently bought one of Melbourne's many homes for sale and are using it as an investment? Good news – the startup costs for your home loan are deductible! As the ATO points out, the following costs are included:

  • Fees for establishing a home loan,
  • Title search costs, and
  • Costs for putting together mortgage documents.

If these total to less than $100, you can make a full deduction in the same year you had to pay them!

2) Pruning the hedges

Unless you use a property management service, you're going to be responsible for certain parts of your rental property's upkeep – including the gardening. Anything you spend fixing up the garden, landscaping, mowing, or paying someone else to do these tasks can be deductible at the end of the financial year.

Greenthumbs might see some tax deductions coming their way.Greenthumbs might see some tax deductions coming their way.

3) Saying goodbye to bugs

Even if you got a pest inspection when you first bought your investment real estate, down the line you can get infestations. Rather than handle these yourself, the State Government's Better Health channel strongly recommends using a professional to handle potentially dangerous pesticides.

But at the end of the process, these costs are also tax-deductible.

4) Agent fees

Agent fees and commissions are another item you can deduct at the end of the financial year.

One way that many people cut down on the stress of running rental property in Melbourne is simply to get a property manager to do it for them. For reasonable fees, they can then screen tenants, organise any repairs and ongoing work that needs to be done, and even handle disputes!

The ATO points out that agent fees and commissions are another item you can deduct at the end of the financial year, saving you that little bit extra.

5) Marketing to the masses

Nowadays, it seems like a lot of people tend to advertise for homes and flatmates through Facebook groups or Twitter. But to do it safely and securely, official channels are ideal. Putting out ads on the internet, through your local real estate agency and even in the newspaper are all good (and tax-deductible) methods of advertising.

Finding people to live in your rental property can be a strain, but at least there's a silver lining!

A few things to remember

This is only a handful of the expenses you can claim when you make an investment in Melbourne real estate – the ATO has a full list, as well as how to do it. But one important thing to note is that you can only claim these expenses for periods when the home was actively rented out or you were advertising.

The ATO has actually specified that they are keeping an eye out for this at the moment, so make sure your paperwork is in order! Cut down on the costs and the stress – hopefully your taxes don't give you too much grief!

Disclaimer: This content does not constitute legal, taxation or financial advice. Advice should be sought from your financial advisor or legal representative before making decisions in relation to your investment property.