Tax Deductions For Property Investors

By Matthew Kenworthy | Property Investors

Most property investors are aware you can claim the interest expense for the loan on your tax returns. There are many extra deductions that borrowers can claim relating to the finance process. We have detailed some of these below:

It is important to note that this information is of a general nature only and is not considered tax advice. For advice specific to your situation, we recommend you speak to an Accountant or Tax Advisor.

Interest Expense

While borrowers may know that you can claim the interest expense for the purchase of the property. Did you know that you may also be able to claim the interest expense of your loan to carry out repairs on the property?

Before you get a loan to complete any repairs, we recommend speaking to your Accountant or Tax Advisor. They will be able to provide guidance on the best loan structure for you. It could be best to add it on to the original loan amount or better to have it as a seperate split, away from the main home loan. This will also make it easy to tell what the funds are for.

On-Going Fees

As well as the interest, you could be able to claim any on-going fees for the loan account. This may include monthly maintenance or annual package fees.

Bank Entry Costs

Most loans have some entry costs attached to them and you can read more about these bank charges below.

It is always important to note though that most of these would be tax deductible, including:

  • Loan Establishment Fees, for when you take out your loan.
  • Title Search Fees, for when the bank completes a search on the property’s title
  • Legal fees, for the bank attending settlement. This also includes the preparing and filing of mortgage documents.
  • Valuation Fees, if the bank conducts a valuation on the property that you are purchasing. A fee may also be charged for existing properties you are using for security.
  • Lenders Mortgage Insurance (LMI). Read More on LMI here.

For a full list of fees and deductible expenses you may wish to follow this link to the ATO website for a video explaining them all.

Summary

It is important to keep in mind that borrowing costs over $100 cannot be deducted immediately. These deductions will need to be spread out over a five year period. If you have $5,000 in borrowing costs, you can deduct $1,000 each full calendar year. You would need to apportion it out in other years. Your Accountant or Tax Advisor would generally handle this for you.

For more detailed information on this you may wish to read the ATO guidance on Claiming Borrowing Expenses.

Are you looking to buy an investment property and would like to ensure that your loan is set up the right way? We can help!
Please get in touch with us and we will happily guide you through the process.

About the Author

Matthew Kenworthy is a specialist in all aspects of Residential & Commercial Finance. He can assist all borrowers from First Home Buyers to Property Investors with Large Portfolios.