Top tips for running your investment property.

Rental properties have been a great source of passive income for many Australians.  Understanding how investment properties affect your income tax and the consequences when selling can help you save time and money.  We have put together a short list of tips to help you do just that!

Many, but not all, of the expenses associated with rental
properties will be deductible.

What to consider when buying an investment property?

Not all the expenses you incur when buying an investment property are deducted.

The costs incurred can be split into three categories:

  • Included in the cost base of the property

  • Deductible as a rental property expense
  • Non-Deductible (at all)

The cost to acquire the rental property and incidental costs associated with acquiring, holding and disposing of it make up the cost base. This figure is used when the property is sold at a future date to determine capital gains/losses and the related tax implications.


When buying a rental property you may have incurred fees such as:

  • Property cost of $170,000
  • Surveyor’s fee of $350
  • Stamp duty of $750 on the transfer of the property
  • Initial repairs to remedy defects, damage or deterioration of $30,000

All of these expenses are included in the cost base of the property ($201,100) and can not be claimed as a deduction of the rental property.

What is deductible as a rental property expense?

After setting up the rental property, almost all the related expenses can be deducted. As with all deductions, you will be required to keep records and provide substantiation (supporting documents). Some deductions will require some forward planning to be able to include them in your tax return and you should consider if the benefits are worth the additional costs.

Often some larger deductions are overlooked or are incorrectly allocated. The main considerations and decisions that usually require your attention are:

  • Identify the difference between repairs and maintenance and depreciating assets

  • Work out if a quantity surveyors report is worthwhile (depreciation schedules)

  • Should you manage the property privately or through an agent.
  • Keep records of landlord insurance.
  • Loan interest relating to the property is deductible!

You can find our rental property checklist for a comprehensive list of supporting documentation to keep for optimising your tax return here: Rental Property Checklist.

The ATO release various guides for accountants and tax payers to help with preparing tax information for rental properties. They have prepared a top 10 tips to help rental property owners avoid common tax mistakes. It covers more areas to consider besides what has been mentioned above and can be accessed here: ATO Avoid Rental Property Mistakes

If you need further guidance on rental properties, please reach out to our office for a FREE consultation.

Alchemy Accountants provide both bookkeeping and accounting services to a range of industries. If you are looking for a bookkeeper/accountant that understands your business, please reach out to us. If you only see your accountant once a year, it may be time to find a new one.

We will work closely with you towards business success. Contact us for a FREE consultation.

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