How to Claim a Tax Refund When Buying an Investment Property in Australia

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

1. Interest on loans.

2. Borrowing Expenses – if the amount is under A$100, it can be claimed in the same year; if over A$100, it must be spread across 5 years;

3. CapitalWorks Deductions – buying an investment property requires engaging a professional quantity surveyor to prepare a depreciation schedule for the property. Refer to Division 43 in the report, which the accountant uses to prepare your tax return;

4. Depreciation on Plant – this figure also appears in the depreciation schedule. Refer to Division 40 in the report. If major facility repairs or upgrades are carried out during the holding period, a professional firm needs to adjust the future depreciation assessment;

5. Body Corporate Fees and Charges – apartments and townhouses generally have this fee, while houses do not. This fee mainly covers prepaid maintenance costs, the property manager's salary, 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, etc., generally A$1,200 to A$1,600 per year;

7. Water Charge – note that water usage costs borne by the tenant are not deductible, but 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, so there is no need to pay it again, but the landlord may choose landlord insurance to guard against loss of property inside the premises or loss of rent;

12. Land Tax;

13. Legal Fees – note that solicitor's fees incurred when purchasing the property are not counted here;

14. Pest Control – this only applies to 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 in the landlord's communications with the real estate agent;

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

19. Other miscellaneous property rental expenses.

Not all of the above costs will necessarily arise; they are listed in full so that everyone remembers not to miss any when claiming their tax return.

There are also several other points to note:

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

2. If the property was purchased during the current financial year, the costs 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 the landlord suddenly has a significant increase in personal income during the current financial year, such as a bonus or the exercise of options, they can prepay the mortgage interest on the investment property for the next financial year, thereby achieving a larger tax refund;

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

5. Relevant records and invoices should be kept and categorised properly.