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Declaring your investment property tax deductions

What are you obligated to declare and what’s necessary to maximise your property investment tax benefits?

Anyone who owns a real estate investment in Australia must make certain declarations to receive optimal property investment tax benefits. Declaring rental income is also required by law. If you’re still yet to lodge your 2021-2022 tax return, keep reading to discover the investment property tax deductions that you need to consider.

Note: While we’re not registered tax accountants, this blog has been purely designed to share general information on the deductions you must declare if you’re a property investor. As Finance and Property Investment Advisers, we aim to educate our clients about their entitlements and obligations so that they can make informed decisions for their long-term wealth creation strategy.

Investment property tax deductions that need to be declared

According to the Australian Taxation Office (ATO), when lodging your tax return, “you must declare all the income you receive for your rental property (including from overseas properties).”

As per the ATO website, the investment property tax deductions for income you receive include:

  • Renting out all or part of your property

  • Short term rentals (holiday homes)

  • Renting your property through a sharing platform (for example AirBNB)

  • Formal and domestic arrangements that include renting out your property to friends and family at below market rates

When you receive rental income for renting out part or all your property, you’ll be taxed at a marginal tax rate. For the most recent financial year, this is how the ATO is taxing landlords, based on their rental income:

Other rental earnings that need to be declared for maximum property investment tax benefits

When owning real estate investment in Australia, you must also declare any other earnings produced from your rental property. As established, you must declare income from rent. However, other earnings that should be declared, to receive fair and optimal property investment tax benefits, include:

  • Interest - As an investor you can claim some account-keeping fees on an account purely held for investment purposes.

  • Dividends

  • Managed funds distributions

  • Capital gains produced from a rental property (if you sold it) - When you sell an investment property at a higher price than you initially purchased it for, you make a capital gain. Therefore, if you make a capital gain in the financial year that you’re lodging your tax return, you must report it. This gain is taxed at a marginal rate. If the property has been held for more than 12 months, you’ll only be taxed on half of the gain. This discount is applied to discourage people from frequently flipping properties.

Tax record keeping tips for real estate investment in Australia
Tax record keeping tips for real estate investment in Australia

Tax record keeping tips for real estate investment in Australia

To accurately lodge your end of financial year investment property tax deductions, it’s important to keep good records. This will help you to report all investment income/ earnings and claim your investment property tax benefits.

Tips that can help you when lodging your tax returns include holding onto the following records:

1. Information stating how much the property was purchased and/ or sold for

2. All income produced from the investment, including:

  • Rental income receipts collected by either yourself or your property manager

  • Any insurance payouts (if applicable)

  • Bond money retained due to damage of a property

  • Letting or booking fees

  • Payments for deductible expenses

  • Lump sum payments of rental income

  • Assessable funds in relation to limited recourse debt arrangements regarding your investment property

3. All expenses paid for the investment. Examples include:

  • Advertising costs

  • Strata fees

  • Insurance fees

  • Council and water rates

  • Agent statements

  • Land tax

  • Maintenance and repairs

  • Interest expenses

  • Capital works

  • Land tax

  • Borrowing fees

  • Pre-paid expenses

Your wealth creation strategy

Are you looking to make real estate investment a driver in your wealth creation strategy? Let us help! Our team of Finance and Property Investment Advisers are helping everyday Australians invest in passive income producing properties, while also making the most of their rightful property investment tax benefits.

Book a no obligation consultation with our team, today, to see how it could work for you.

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