Tax Time Deductions

Tax time is nearly here once more. So, if you’re a landlord in Australia, it’s imperative that you take control of the situation ahead of the October 31st deadline.

As a landlord, understanding Land Tax and what deductions are allowed is important.

Here’s some information to consider.

Understanding Rental Property Tax

While you are eager to learn about the available deductions, you must first know how tax on rental properties works. The Australian Bureau of Statistics (ABS) reported a 12.7% increase in investor lending over the past year, so there are thousands of landlords who are now preparing for their first tax returns.

You do not need to pay tax on earnings in Australia up to $18,200. The tax earning brackets are currently;

  • Bracket 1: Up to $18,200. No tax.
  • Bracket 2: $18,201 – $45,000. 19c for every $1 over $18,200.
  • Bracket 3: $45,001 – $120,000. 32.5c for every $1 over $45,000 + $5,092.
  • Bracket 4: $120,001 – $180,000. 37c for every $1 over $120,000 +$29,467.
  • Bracket 5: Over $180,000.01. 45c for every $1 over $180,000 + $51,667.

However, any earnings gained from your rental property (this includes renting out a room of your home), are added to your salary and other income sources. So, if you earn $10,000 from rental income on top of your $17,500 salary, that will bring your total to $27,500. Likewise, if you earn $60,000 in your job, a $25,000 property income stream will knock you up to $85,000.

Before adding your rental income to the equation, though, you will first want to deduct any expenses that you are entitled to.

A Word Of Warning For Landlords In Australia

The Australian Tax Office will allow landlords to claim a variety of deductions in relation to their rental property earnings. However, in 2021, they are eager to clamp down on false claims. As such, all deductions must;

  • Come with a receipt or other proof of purchase,
  • Be an expense you paid money for and were not reimbursed for,
  • Be directly related to the rental property earnings.

For investment property expenses, the ATO is looking to clamp down on people claiming expenses related to their personal homes rather than rental properties. Furthermore, travel costs (unless actively working in the business of letting rental properties), unrented holiday homes, and lump sums for capital works will no longer go unnoticed.

In short, any tax deductions must be filed correctly and best to seek professional advice.

Tax Deductions For An Australian Landlord

While it’s important to avoid illegitimate claims, the ATO still welcomes landlord deductions at tax time. An accountant can prepare all aspects of your return to ensure that you meet your legal obligations while avoiding any threat of overpaying on tax.

There is a long list of items that can be included in your tax deductions, including but not limited to;

  • Bank charges,
  • Body corporate fees,
  • Depreciation,
  • Capital works (2.5%),
  • Council rates,
  • Gardening and landscaping,
  • Insurance,
  • Maintenance and repairs,
  • Advertising costs,
  • Rental agent fees.

It’s unlikely that you will be eligible for all items on the list of tax deductibles for landlords. However, you will probably be eligible to include several features, which will reduce your payments when tax time arrives.

Whether it’s your first return or not, starting early will give you the best chance of a stress-free experience. Get started today!

17 September, 2021
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