Last week we took a look at depreciation in property assets and highlighted just how important a depreciation schedule can be for any investor. This week we thought we would delve a little further by exploring other ways an investor could get the most financial benefit come tax time - tax deductions.

Before we start, let us quickly retouch on depreciating assets...

As we mentioned in last week’s write up, when purchasing a property, the contents start to depreciate in value – these are the depreciation assets; items within the property which are not attached to the structure of the building and whereby their value deceases over time. Think curtains, carpet, clothes dryers, light fixtures and the like.

Depreciating assets are probably one of the more complex things to claim, which is why it serves you well to speak with a quantity surveyor like the experts at Napier & Blakely who appeared in last week’s story.

Why is it more complicated you ask? Because buying a depreciating asset is not typically considered an upfront tax deduction. However, the cost of a depreciating asset is tax deductible over the effective life of the asset. Meaning, the dollar signs can certainly add up over the years.

The key, for any property investor, is to claim as many tax deductions as they are legally entitled to. After all, every tax dollar you claim goes towards your overall investment return and financial wealth so the more deductions investors can claim on a property, the higher their tax benefit. For that reason alone, it is vital not to overlook them. That being said, here are five common deductions that may be made on negatively-geared investment properties.

1. Interest

In a negative-gearing investment property, interest is certainly one of the biggest tax deductions that can be made. This refers to the interest incurred on money borrowed against the property, including purchasing the property, undertaking repairs and managing tenant-related issues.

2. Repairs and maintenance

Plastering up cracks in the wall, fixing an oven that has stopped working, repairing a leaky tap, replacing a broken window… all of these are legitimate tax deductions when it comes to a rental investment. They come under the banner or repairs and maintenance, which, in the investment world, means restoring something to its original condition due to tenant wear and tear.  Talk to your advisor to find out what repairs you are eligible to claim in the coming year.

3. Tenancy costs

There are a multitude of tenancy costs that can be included as possible tax deductions. Some of the most common ones include advertising costs, letting fees, landlord insurance, lease agreements (preparing new ones and amending existing ones) and legal costs required to evict a tenant. 

4. Travel

Travel is one of the not-so-obvious tax deductions and can often tend to be overlooked. This deduction encompasses the cost of travel to inspect the rental property whether that entails motor vehicle deductions (for local properties within driving distance) or even airfares (for properties interstate).  Make sure you get all the information on this one from your financial advisor as there are strict regulations in terms of the portion of your ‘trip’ and the amount you can claim back.

5. Other holding costs

Another tax deduction that may be claimable are a property’s holding costs; basically any monies spent on the overall management and upkeep of the investment property. We are talking anything from cleaning, gardening, security monitoring and pest control to body corporate fees, council rates, building and contents insurance premiums and property management fees – these may be claimed as a deduction so ensure you speak to your tax agent about these costs and if it is something you could be entitled to claim back.

So there you have it... for some investors this article might serve as a simple reminder, while for others it may have uncovered some golden opportunities which can now be discussed with a trusted financial consultant or accountant.

Here at HSBP we want to help build your investment portfolio through sound industry knowledge, first-class service and exclusive opportunities to purchase some of the best investment properties Brisbane has to offer.

This includes limited offers that can take your investment to new heights, like the following promotion we launched today whereby any of our clients that sign a contract with us in October will receive access to a free depreciation schedule from NBTaxupon settlement of the property.

For more information on how we can grow your investment including how you can redeem the above promotion, speak to the professional consultants at HSBP on sales@hsbrisbaneproperty.com.au