Expenses You Can’ t Claim
You can’ t claim deductions for capital expenses, private expenses, or expenses that do not relate directly to your rental property.
Capital expenses are the costs of buying a capital asset or increasing its value: for example, the cost of buying the property and making improvements. Private expenses are things you buy or pay for that are for your own benefit rather than to generate rental income.
Expenses you can’ t deduct from your rental income in your tax return:
• The purchase price of a rental property
• Any principal portion of mortgage payments
• Interest on money you borrow for any purpose other than financing a rental property
• Costs associated with repairing or replacing any damaged part of the property if that work increases the property’ s value
• Real estate agent fees charged as part of buying or selling the property
• Your time when you do repairs and maintenance work
GOODS & SERVICES TAX( GST)
GST is not charged on residential rent so this means you don’ t include rental income in your GST returns( if applicable).
OTHER EXCEPTIONS
If the property isn’ t rented for the full year: isn’ t occupied by tenants; isn’ t available to be rented out at any stage during the year; or is only available for rent for part of the year, then you can’ t claim the full year’ s ongoing costs such as rates, insurance and interest.
INITIAL COSTS
Any initial costs associated with finding an appropriate rental property, including the cost of checking the condition of a property before purchasing it e. g. a building report
REPAIRS OR UPGRADES TO A SUBSTANDARD INVESTMENT PROPERTY
You can’ t claim expenses incurred to bring a rental property up to the required condition necessary before it can be rented. This could be substantial repairs to an existing roof, or healthy homes compliance related work for items that didn’ t already exist at the property, e. g. installing a brand new underfloor moisture barrier.
For more detail on the claimability of healthy homes standard costs, see‘ Healthy Homes Compliance Costs’ on page 10.
INVESTMENT INFORMATION GUIDE 9