Tax deductions to claim on your Mount Isa rental property
If you own a Mount Isa investment property, it’s important to claim all your tax deductions to maximise your return. Read on to find out about all the tax deductions you can claim on Mt Isa rental properties, including some expenses that aren’t as obvious as others.
Rental property expenses to claim in full now
There are two basic types of rental property expenses you can claim. Ones that you can claim in full in the financial year that you pay them, and others that you can partly claim this financial year and then spread the rest of the cost over several future years as well.
Let’s look at expenses you can claim in full now first. They include:
- interest on your loan if you borrowed to buy your Mount Isa investment property.
- Mount Isa council rates on your rental property (including water charges if your tenant isn’t charged for them).
- body corporate fees if you own a Mount Isa unit or townhouse and lease it to tenants.
- advertising fees to attract tenants.
- property manager fees.
- yard maintenance or cleaning fees (if your tenants don’t do it).
- insurance premiums and pest control fees for your rental property.
- general repairs and maintenance fees (provided they aren’t classed as capital improvements, which must be claimed over several years instead). Repairs and maintenance expenses cover general property wear and tear over time, while capital improvements are more significant expenses to improve the value of a property.
Rental property expenses to claim over several years
Rental property expenses that you can claim over several years include:
- borrowing expenses (such as loan establishment fees, lender’s mortgage insurance, lender valuation fees, title search fees, mortgage document preparation, mortgage broker fees and stamp duty). Tax deductions for these expenses can be spread over five years (i.e. 20% per year).
- capital expenses (i.e. renovations to improve the value of your rental property). You can deduct 2.5% of these expenses every year for 40 years. It’s important not to confuse capital expenses (that must be depreciated over 40 years) with repairs and maintenance expenses (that can be depreciated in full in the year you pay for them).
- depreciation on carpet, curtains, appliances and furniture. There are different depreciation rates on different items based on their value and estimated useful life. Depreciation can be an easy tax deduction to miss on your rental property when you’re doing your tax return. You should get professional advice from an accountant or tax agent to make sure you maximise all your eligible rental property depreciation and other deductions.
What is negative gearing?
Your Mount Isa rental property may or may not be negatively geared. Negative gearing is simply a term that describes a situation where your rental property expenses in a financial year are higher than your rental income from tenants.
Even though negative gearing may sound like a bad thing on the surface, you will end up paying less tax than you would have, and the increase in value of your property over time may give you greater overall benefits. It’s also important to realise that some of your rental property expenses (like depreciation) aren’t ‘out of pocket’ expenses. In other words, you don’t actually pay them.
If you’re thinking about leasing, renting, selling or buying any Mt Isa property, or you need your investment property managed, then contact our team today for an obligation-free chat!
We’d be happy to provide you with advice and to answer any questions you have.