6 easy steps to maximising your investment property tax deductions in 2024

1. Know what you are entitled to claim

The Australian Tax Office (ATO) has specific rules regarding what can and cannot be claimed as a deduction for investment properties. Familiarise yourself with these rules so that you know what deductions you are entitled to make.

The good news for property investors is that many of the expenses associated with owning a rental property can be claimed as tax deductions.

This includes:
☑ Interest on your home loan

☑ Property management fees

☑ Insurance costs

☑ Council

☑ Water rates

☑ Land taxes

Over time, these deductions can add up to significant savings. Additionally, if your property is new or has undergone significant renovations, you may be eligible to claim even more through depreciation deductions.

2. Know what you cannot claim

As a property investor, it is crucial to understand the difference between repairs, maintenance, and capital improvements. Making this distinction can prevent you from making costly mistakes when completing your annual tax return.

Repairs involve fixing damage or deterioration, while maintenance includes work to prevent these issues. Capital improvements, on the other hand, refer to new asset purchases or improvements beyond an asset’s original state. It’s important to know what you cannot claim as a deduction on your taxes, but with a clear understanding of these terms, you can accurately categorise your expenses and protect against any potential audit issues.

3. Keep records of your expenses 

Having the right paperwork and documents on hand can make life a lot easier when it comes to filing taxes for your investment property. Make sure that you always keep receipts for every purchase you make related to your rental property.

When it comes to owning property, there are a lot of things to keep track of – contracts, loans, expenses, income, and more. That’s why it’s essential to set up an easy-to-use record-keeping system as your first priority. You don’t need to be a financial expert to do this – a simple spreadsheet will suffice. Don’t forget to scan copies of your receipts to make storage and access easier. The beauty of keeping records of every transaction is that you’ll be able to claim everything you’re entitled to come tax time. Whether you use a tax agent or prepare your tax returns yourself, good record-keeping will make the process a breeze.

4. Take advantage of depreciation deductions

Depreciation is the gradual decrease in value of an asset over time. For tax purposes, rental property owners can claim a deduction for the depreciation of certain assets related to their rental premises such as air conditioners, carpets, appliances, and more. It’s important to note that these deductions are only available on items that have a measurable lifespan.

For example, you can claim depreciation of the building itself over a period of 40 years. Many people believe that owning a house automatically grants them greater deduction opportunities. However, it is crucial to understand that the construction of a residential unit can often involve higher construction costs. and these higher costs can actually work in your favour! They have the potential to boost the overall depreciation claims unit owners can make, opening up rewarding possibilities come tax time!

The ATO has comprehensive guidelines on what qualifies for depreciation deductions and how much can be claimed, so it’s important to check with them before making any claims.

5. Offset your taxable income with expenses

Are you worried about your taxable income coming too close to a higher tax threshold? You might want to consider prepaying some of your investment property expenses to maximise your tax deductions. The ATO allows investors to deduct expenses from their income if they have incurred them in the same financial year. Expenses such as advertising for tenants, insurance, rates and taxes, repairs and maintenance costs, and travel expenses are deductible.

Borrowing costs such as loan establishment fees, title search fees, and legal expenses are deductible. If you have borrowed money to finance the purchase of your investment property, you may be able to claim back some or all of the associated costs. Again, it’s important that you keep records of all your borrowing costs, including the date they were incurred, so you can claim back your expenses when it comes time to lodge your tax return.

6. Don't forget about capital gains tax

Capital Gains Tax (CGT) is a tax payable on the net capital gain or loss made from the sale of an asset. Rental property owners are liable for CGT on any profits they make from the sale of their investment property. The good news is, if you’ve held the property for more than a year, you may be eligible for a 50 percent discount on your net capital gain, which can significantly reduce the amount of tax you will need to pay. It’s also important to remember that you only pay CGT when you sell the property. You should hold onto your property for at least 15 years before considering selling to maximise the potential capital growth and defer CGT payment.

About Ironfish Property Management:

We understand that there are many important aspects to consider when managing a property, from lease preparation to the finalisation of the bond. Our experienced team provides regular updates on enquiries and pending applications, keeping you informed of the ongoing rental process.

With our extensive knowledge of the local rental market, we are able to provide detailed comparative market analysis reports that estimate rental values based on current market conditions.

We can also recommend ways to optimise the presentation of your property to maximise market appeal and target the right renters.

At every key stage, the team at Ironfish strives to provide maximum return with minimum expense. Trust us to manage your property with excellence, care and efficiency.

Professional & thorough condition reporting
Our experienced Property Manager will complete a detailed report by recording the condition of each room and area of the property. With comprehensive descriptions and quality photos to match, this report is designed to keep your property safe.

Routine inspections
It is important to stay updated on the condition of your investment property. Our Property Managers will carry out regular routine inspections and provide you with detailed reports on the condition of your property, any maintenance items, as well as feedback from tenants.

Lease renewals & rent reviews
Our Property Managers will ensure that tenant leases and rental rates are kept up to date, and if it is time for a rent review our team will negotiate with the tenants on your behalf. This ensures that you are getting the best possible return from your investment property.

Maintenance management
We’ve taken the stress out of managing your rental property by offering a full range of maintenance services. Our team will develop a tailored plan for your property, making sure that all maintenance requests are promptly attended to and the property is kept in its best condition.

Service accounts, statement, EOFY
We handle your payments and account management for all expenses. You will receive a statement summarising each disbursement, as well as an annual statement at the end of each fiscal year.

Compliance management
Ironfish keeps up with changes in legislation and provides a thorough compliance strategy so you can have peace of mind knowing that you are compliant with all relevant regulations.

Arrears management
We are committed to working proactively to ensure that tenants keep up with their rental payments. In the event of any arrears, our Property Managers will act quickly to rectify the situation and ensure that you are not out of pocket.

Final thoughts

Just as building a successful property portfolio requires the right strategy, you can also minimise your tax burden by following the right advice. At Ironfish, we understand the importance of making strategic decisions when it comes to property investment. Our Property Management service is designed to ensure leasing and managing your investment properties is a stress-free and rewarding experience. And the good news is that our property management service is tax-deductible! Ironfish gives property investors the support they need to make sure their investments are working in their favour.