Interest is, without a doubt, the most significant tax deduction you can obtain in a negative gearing arrangement. Let’s say that your property is rented. In this situation, the interest resulted for the money you have borrowed to purchase the property is tax-deductible. The money used for the necessary repairs and building improvements or other aspects concerning rent is also tax-deductible.
If you have advertised your property in order to obtain tenants, these costs can also be claimed as a tax-deduction. Any expense you may have during the process of preparing the lease of a property is tax-deductible. Another cost that is deductible but goes unnoticed in most cases is travelling for the inspection of the property. Still, you need to make sure to keep all the receipts, invoices and travel diary, in order to maximise your tax savings.
Common depreciating assets include curtains, dishwashers, clothes dryers, carpets and other similar items. Other depreciating costs are those associated with solar panels or hot water systems.
Normally, capital works costs cannot be tax-deductible. Distinct from depreciating assets, capital works are considered part of the building, for instance, an extension or a structural improvement such as a retaining wall is a capital work. You can consider hiring a qualified person who will provide you with an estimative depreciation value on capital works through a depreciating report, this claim will only postively impact you if you sell the property as it will reduce your capital gains as it increases your cost base.
Repairs and maintenance
If you must undergo a wide range of repairs given tenant wear-off, you can obtain a tax deduction for these repairs as well. The only condition is that you should prove that those particular issues weren’t present the moment you purchased the property. Initial costs that investors pay for repairs and building improvements generally count as property costs. In a range of cases, the costs associated with repairs count as depreciation.
Additional holding costs
Holding costs encompass cleaning costs, gardening costs, security monitoring fees, property manager’s fee and so on and so forth. Normally, you can obtain tax-deduction for the majority of these costs as well.