How to claim a tax refund when buying an investment property in Australia?

First, we need to be clear about which costs and expenses are tax-deductible, so you don't miss any deductible items and end up paying more tax than necessary.

1. Loan interest (Interest on loans);

2. Borrowing Expenses — if the amount is less than A$100, it can be claimed in the same year; if more than A$100, it must be deducted over 5 years;

3. Building depreciation (Capital Works Deductions) — when buying an investment property you need to engage a professional quantity surveyor to prepare a property depreciation schedule; refer to Division 43 in the report, which your accountant will use to prepare your tax return;

4. Plant depreciation (Depreciation on Plant) — this amount will also appear in the property depreciation schedule; refer to Division 40 in the report. If any major facility repairs or renovations are carried out during the ownership period, a professional firm will need to adjust the future depreciation assessment;

5. Body Corporate Fees and Charges — apartments and townhouses generally have such fees, whereas standalone houses do not. This fee mainly covers advance payments for maintenance, the property manager's wages, compulsory building insurance, accounting fees and so on. It is generally between A$2,000 and A$5,000 per year;

6. Council Rates — fees charged by the government, mainly used for community landscaping and sanitation, rubbish collection and the like, generally A$1,200 to A$1,600 per year;

7. Water charges (Water Charge) — note that water usage charges borne by the tenant are not deductible, while water supply and drainage charges are deductible;

8. Advertising for tenants;

9. Cleaning;

10. Gardening and Lawn Mowing;

11. Insurance — for apartments and houses, compulsory building insurance is already included in the body corporate fees and does not need to be paid again, but landlords may choose landlord insurance to cover loss of property inside the premises or loss of rent;

12. Land Tax;

13. Legal Fees — note that legal fees incurred when purchasing the property are not counted here;

14. Pest Control — this only applies to standalone houses. For apartments and townhouses it is covered within the body corporate fees;

15. Property Agent fees and Commissions;

16. Repairs and Maintenance;

17. Stationery, telephone and postage — telephone and postage costs incurred by the landlord in contacting the real estate agent;

18. Travel Expenses — travel costs incurred to inspect the property or collect rent. For example, if you live in Melbourne and buy an investment property in Brisbane, the airfares and other costs incurred in coming to deal with rental matters can be claimed;

19. Other miscellaneous property rental expenses.

Not all of the above expenses will apply. We have listed them so comprehensively simply so that you don't miss anything when claiming your tax return.

Please also note the following points:

1. If the property is owned by multiple people, each person must declare tax separately according to their ownership share;

2. If the property was purchased in the current financial year, the amounts paid to the seller at settlement — such as council rates, body corporate fees and water charges — can be claimed; for details, refer to the Settlement Sheet;

3. If a landlord's personal income suddenly increases significantly in the current financial year — for example from a bonus or exercising options — they can prepay the next financial year's loan interest on the investment property, thereby achieving a larger tax refund;

4. If an owner-occupied home is converted into an investment property, the expenses are apportioned proportionally, and costs and expenses incurred during the owner-occupied period are not deductible;

5. Keep and categorise all relevant records and invoices properly.