Nav­i­gat­ing rental tax claims

Pilbara News - - Property - Sa­man­tha Jones

As an owner of a rental prop­erty, you are en­ti­tled to claim tax de­duc­tions for some of the ex­penses you in­cur.

You need to un­der­stand which ex­pen­di­ture cat­e­gory your costs fall into. The three cat­e­gories are: An ex­pense you can­not claim a de­duc­tion for.

An ex­pense you can claim an im­me­di­ate de­duc­tion for in the in­come year you in­cur the ex­pense.

An ex­pense you can claim de­duc­tions for over sev­eral in­come years.

Ex­penses you can­not claim tax de­duc­tions on in­clude:

Ac­qui­si­tion and dis­posal costs of the prop­erty.

Ex­penses not ac­tu­ally in­curred by you, such as wa­ter or elec­tric­ity charges.

Ex­penses that are not re­lated to the rental of a prop­erty, such as ex­penses con­nected to your own use of a holiday home that you rent out for part of the year.

There are ex­penses you in­cur that you can claim tax de­duc­tions for over sev­eral in­come years.

These de­duc­tions fall into three cat­e­gories.

Bor­row­ing ex­penses — ex­penses di­rectly in­curred from tak­ing out a loan on your prop­erty.

It in­cludes loan es­tab­lish­ment fees, ti­tle search fees and costs for pre­par­ing and fil­ing mort­gage doc­u­ments. Also in­cluded are costs that you in­cur based on your lender’s re­quire­ments, for ex­am­ple, lender’s mort­gage in­sur­ance. Bor­row­ing ex­penses do not in­clude in­ter­est ex­penses or in­sur­ance pol­icy pre­mi­ums.

De­pre­ci­at­ing as­sets — the Aus­tralian Tax Of­fice states you are en­ti­tled to deduct an amount equal to the de­cline in value for an in­come year of a de­pre­ci­at­ing as­set you held for any time dur­ing the year.

Ex­am­ples in­clude car­pets de­pre­ci­ated over 10 years, cur­tains de­pre­ci­ated over six years and so­lar pow­ered gen­er­at­ing sys­tems de­pre­ci­ated over 20 years.

Cap­i­tal works de­duc­tions — these are cer­tain kinds of con­struc­tion ex­pen­di­ture.

These de­duc­tions would gen­er­ally be spread over a 25 or 40-year pe­riod. Cap­i­tal works de­duc­tions in­clude things like a build­ing or an ex­ten­sion, al­ter­ations to the prop­erty, for ex­am­ple, re­mov­ing or adding an in­ter­nal wall struc­tural im­prove­ments to the prop­erty.

You are un­able to claim cap­i­tal works de­duc­tions un­til con­struc­tion is com­plete, and your to­tal cap­i­tal works de­duc­tions can­not ex­ceed the con­struc­tion ex­pen­di­ture.

You may also only claim de­duc­tions for the pe­riod dur­ing the fi­nan­cial year that your prop­erty is rented or avail­able for rent.

For a de­tailed ex­pla­na­tion of the ex­penses you can and can­not claim tax de­duc­tions for, re­fer to the ATO’s 2014 guide for rental prop­erty own­ers.

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