Tax Tip for first time landlords

15th January 2019 |

Purchasing and letting out your first rental property investment can be daunting.

From making the property ready for rent to finding a real estate agent that you can trust – thinking about the tax implications of your new investment may be the last thing on your mind.

Any income you will now receive from your rental property will have to be declared to the ATO and will form part of your assessable income.

Any eligible deductions will reduce this income and therefore reduce your tax liability.

Generally, the deductions available for a rental property include the cost of maintaining the property (repairs and maintenance), council rates, water rates, land tax (if applicable), the cost of property management, building & landlord insurances, pest control, interest on monies borrowed for the purchase, borrowing costs and advertising.

Any expenses relating to landscaping (ie. hiring a landscaper to install hedges, purchasing plants) are non-deductible but may be added to your property’s cost base. Expenses to maintain the garden (ie. lawn mowing, gardening, fixing reticulation) are deductible.

Other deductions that may apply include depreciation & capital works deductions. Capital works is an annual 2.5% claim for the cost of construction and only applies to properties that were built after 17 July 1985. If your rental property is eligible, it might be a good idea to discuss with us the benefit of having a depreciation / capital allowances report prepared.

Be mindful that deductions can only commence from the date the property is actually available for rent.

Any costs associated in preparing your rental property for rent may be categorised as a point too soon and therefore non-deductible, however depreciation may apply.

Mistakes are easily made and the ATO scrutinises rental property deductions quite closely.

Speak to CrossCorp for all of your advice.