Expenses that you can commonly claim on your rental property include:
There are a few considerations when claiming expenses for an investment property.
If your property isn’t rented out, the expenses might be deductible provided that you made the property genuinely available for rent. What this means is that you advertised the property and gave it exposure so that potential tenants might rent it and given the circumstances, tenants are likely to rent the property.
If these factors are absent, it means that the owner didn’t make an effort to rent out the property and doesn’t have an intention to generate income through the property. Some factors that indicate that the owner has not made a genuine intention of renting out the property include:
If you made your property available for rent for only some part of the year or if only a part of your property was used to earn rent or if your property was rented out at non-commercial rates, then your expenses must be apportioned to determine the deductible amounts.
If your property is used for both income and private purposes, a deduction can only be claimed for the portion of expenditure that is related to the income purpose.
If you only rent a part of your property, the deduction can only be claimed on the part of your expenses that are related to the rental income.
If you rent your property out at a rate lower than normal rates, then the amount of deduction that can be claimed will be limited.
There are some services that extend beyond the income year. For example, when you pay for an insurance premium on the first of January and it provides coverage for the entire year. The expenses that provide for such services are called pre-paid expenses.
If the pre-paid expense is less than $1,000, you can claim a deduction on it in the current income year. The same can be done for expenses of $1,000 or more provided that the period of service is less or equal to 12 months.
If the deductible expenses of your property exceed the income that you’re earning from it, then your rental property will be termed as ‘negative gearing’. In case of negative gearing, you might be able to claim a deduction for your rental expenses against your rental income and other income. If the other income isn’t sufficient to absorb the loss, it will be carried forward to the next year.
Expenses that can’t be Claimed
If you are facing problems with your loan application or want to learn more about genuine savings, get in touch with Josh Financial Services as our experts can help you work through your individual situation.