ATO deductions every residential investor should know

EOFY has approached. Time to do your taxes. But let’s make sure we maximise your investment.

Owning an investment property can be a powerful wealth-building strategy but if you’re not claiming all the tax deductions available to you, you could be leaving thousands of dollars on the table. Understanding the ATO’s rules is essential for maximising returns and managing your cash flow effectively.

1. Interest on home loans

The interest portion of your investment home loan repayments is fully deductible. This applies to your mortgage, line of credit used for renovations, and other borrowings related to the property, including borrowing costs to set up the loan. Note that principal repayments are not deductible.

2. Repairs and maintenance

Ongoing repairs and maintenance, such as buying a new dryer/dishwasher or repainting walls, are deductible in the year they are incurred. Improvements or renovations that increase the property’s value, however, must be claimed over time as capital works deductions.

3. Depreciation

Depreciation allows investors to claim deductions for:

• Plant and equipment: appliances, carpets, furniture, air conditioning units, mirrors, smoke alarms; even toilet brushes….etc.

• Capital works: structural elements of the property.

Engaging a qualified quantity surveyor ensures you accurately calculate these deductions and maximise your claim.

4. Property management and associated fees

Property management fees, advertising for tenants, and legal expenses related to tenancy issues are fully deductible. Using professional services can save time and reduce stress while also providing a tax benefit.

5. BCC Rates, Landlord/home/contents insurance & Body Corp fees

Ongoing property costs, including Brisbane City Council rates, Body Corp fees, Urban Utilities water charges, and landlord insurance, can all be claimed as deductions. Keeping these organised is critical for accurate reporting.

Professional tips for investors from AK & BACH

• Maintain records: Keep dates, receipts and documentation for all expenses.

• Google Drive and Excel spreadsheets will be your best friend.

• If your taxes are quite simple - you could just use the depreciation calculator provided by the ATO if doing your own taxes instead of qualified quantity surveyor and save money.

• Keep a copy of your original home loan offer as it outlines borrowing costs and can be deducted using the ATO’s borrowing costs calculator.

Bottom line

Effectively managing your investment property deductions can significantly improve cash flow and overall returns. By understanding the rules, keeping accurate records, and seeking professional advice when necessary, investors can ensure they are maximising the benefits available under Australian tax law.