Mercia | Taxation, Business & Finance Advisers

Rental Expenses
You can claim a deduction for some of the expenses you incur for period your property is rented or is available for rent. However, you cannot claim expenses of a capital or private nature.

When you claim a deduction for expenses incurred in gaining your assessible rental income, there may be situations where the expenses need to be apportioned between deductible and non-deductible expenses. Examples include:

1. If the property is not available for rent for the full year, you may need to apportion some of the expenses on a time basis.
2. If only part of the property is used to earn rent, you can claim only that part of the expenses that relates to the rental income. As a general guide, apportionment should be made on a floor area basis – that is, by reference to the floor area of that part of the residence solely occupied by the tenant, together with a reasonable figure for tenant access to the general living areas, including garage and outdoor areas.
3. If you combine travel to inspect or maintain your rental property with travel for private purposes, you may need to apportion your travel expenses.

Deductions that you may be able to claim include:

1. Advertising for tenants
2. Bank charges
3. Body corporate fees
4. Cleaning
5. Council rates
6. Electricity and gas
7. Gardening and lawn mowing
8. In-house audio/video service charges
9. Insurance: building, contents, public liability
10. Interest on loans
11. Land tax
12. Legal expenses
13. Lease costs: preparation, registration, stamping
14. Pest control
15. Property agent’s fees and commission
16. Quantity surveyor’s fees
17. Repairs and maintenance
18. Secretarial and bookkeeping fees
19. Security patrol fees
20. Servicing costs – such as servicing a water heater
21. Stationary and postage
22. Telephone calls and rental
23. Tax-related expenses
24. Travel and car expenses: rent collection, inspection of property, maintenance of property are generally now NOT allowed as of 1 July 2017, exceptions apply.
25. Water charges.

You can claim a deduction for these expenses only if you have actually incurred the expenditure.

Borrowing expenses, depreciation on plant and capital works deductions (special building write-off deductions) may be allowable as deductions over a number of income years.

Expenses that you are not able to claim include:

1. Stamp duty on conveyance of a rental property ( this is added to the cost base of your property)
2. Expenses not actually incurred by you such as water or electricity charges borne by your tenants
3. Expenses that are not related to rental of property, such as expenses connected to your own usage of a holiday home that you rent out for part of the year
4. Depreciation expenses of used equipment, for buyers of non new residential properties the cost of equipment such as airconditioners etc is now included in the cost base of the property, making it effectively a deduction against the sale proceeds in the future. New residential property owners will be able to claim the deduction.

Depreciation – Building Depreciation (capital write off) deductions (depreciation of the building is deductible). However depreciation Claims for equipment are not allowable from 9 May 2017 for non-new residential properties purchased on or after this date. Properties purchased prior to this date are continued to be allowed to claim the write off.  The write off are deductions that you receive without paying cash for them so are valuable to investors.  These deductions are allowable based on the year you purchased your property, for the rates that apply to you see our <rates page>.  To work out an estimate of the depreciation claim <click here>. For NEW residential property buyers the following are the examples of commonly used plant and equipment in rental properties that are allowable for new rental properties:

1. Blind, Venetian
2. Carpets
3. Curtains and drapes
4. Electric bed
5. Electric clock
6. Electric heater
7. Furniture and fittings
8. Garbage unit, compacting
9. Hot water service
10. Lawn mowers
11. Linoleum and similar floor covering
12. Microwave ovens
13. Radios
14. Refrigerators
15. Stoves
16. Television sets
17. Vacuum cleaners
18. Washing Machines

Some items found in a rental property are regarded as part of the setting for the rent producing activity and do not qualify as separate items of depreciable items of plant in their own right. However, a deduction may be allowable for some of these items under the Capital works deduction – special building write-off provisions. Examples of such items are:

1. built-in kitchen cupboards
2. clothes hoists
3. door and window fittings
4. driveways and paths
5. electrical wiring
6. fencing and retaining walls
7. floor and wall tiles
8. garages and non-portable sheds
9. in-ground swimming pools, saunas and spas
10. plumbing and gas fittings
11. reticulation piping
12. roller door shutters.
13. roof top ventilators and skylights
14. security doors and screens which are permanently fixed to the building
15. sinks, tubs and baths, and
16. wash basins and toilet bowls.