18 ongoing rental property costs (and which ones are tax-deductible)

There’s a reason why property investment for many Australians is considered a full-time job. There are a number of responsibilities which fall on the property owner to take care of, as well as costs they must absorb. From preventative maintenance to value-enhancing improvements, this kind of work comes with a significant price tag, but thanks to the Australian Taxation Office, a number of these outgoing costs are tax-deductible.

“Most small landlords can deduct up to $25,000 in rental property losses each year.”

- Nolo, Top Ten Tax Deductions for Landlords

Here are the 18 ongoing costs associated with owning a rental property, and what you can claim the tax back on according to the Australian Tax Office expense deduction list for 2019*.

*Please note this list is subject to change, so checking the ATO website or consulting with an accountant is always advised.

1. Property agent's fees and commissions (tax-deductible)

To have your property managed by a real estate company can cost you a substantial amount, and there’s no “fixed rate” management fee. Commissions vary by state and often range from 5% to around 20%, and other costs can include letting fees, marketing fees, lease renewal fees, inspection fees and more. To give a rough estimate, a property which leases for $400 per week at a 7% commission would be around $30 commission. 

2. Building and Contents insurance + Public liability (tax-deductible)

According to Canstar Research, insurance premiums would range from $297 - $689 for a townhouse to $1,101 - $4,330 for a detached dwelling, based on an annual premium rate with a $500 excess. House insurance claims cover fire, theft and flood, while landlord liability claims can include, loss of rental income, malicious or accidental damage, water damage and the passing of a tenant.

3. Council rates (tax-deductible)

Council Rates are calculated by taking your property’s current valuation and multiplying it by the rate in the dollar.

Here is an example by Victoria Council:

If the Capital Improved Value of a property is $250,000 and the council rate in the dollar is set at 0.0042 cents, the rate bill would be $1050 ($250,000 x 0.0042)

4. Bank fees (some may be tax-deductible)

For a principal + interest home loan, only the interest can be tax-deductible, not the principle. Want to find out more about choosing the right home loan? This article should help. 

5. Pest control (tax-deductible)

No matter how small the pest, the cost to eliminate the problem can set you back $130 for a one-off visit, to around $700+, depending on the service. If left unattended the pest infestation can quickly spiral out of control and become more difficult to treat.

6. General repairs and maintenance (tax-deductible)

General maintenance including repainting a ceiling, fixing a fence or steam cleaning the carpets is essential to ensure your house remains maintained to a decent standard and to ensure the safety, happiness and wellbeing of your tenants. In some cases, asbestos removal may be considered a 'deductible repair' despite the extensive nature of the work required. This is because it may be classed as an 'environmental protection activity' – so definitely one worth looking into to ensure your property is safe for your tenants. 

Tip from ATO: It's also a good idea to find out whether the company or service you use has a registered ABN. If not, you will be required to withhold 47% to be paid as tax. 

Interested to learn more about what to look out for when you visit your rental property next? Here are 14 things to check to avoid major problems in future.

7. Cleaning (tax-deductible)

The average cost of house cleaning in Australia can cost between $60 - $90 per hour for a 'deep clean' which is generally required in between tenancies. According to the ATO, this cost is usually tax-deductible. 

8. Interest on loans (tax-deductible)

If you have taken out a home loan to buy your rental property and it is being rented, then you may be eligible to claim the interest charged on the loan. The criteria are strict as the ATO want to ensure homeowners are not living in their property or using it for personal reasons such as refinancing etc. 

9. Renovation (generally not tax-deductible)

Renovations in the rental world are considered by the ATO to be 'of a capital nature' – meaning structural enhancements such as extending and altering the home; updating the kitchen/bathroom; pre-existing remedial work that was required before you acquired the property etc. are not tax-deductible, but are often essential. For example, if there is a room in the house which does not receive sufficient light, then it might pay off to have a window installed (at a cost to you) to avoid mould/dampness issues and poor ventilation in future. 

10. Painting (tax-deductible)

Service maintenance work when required can sometimes be a tax-deductible expense.

11. Electrician fees (tax-deductible)

Average hourly rates by state (excluding the call-out fee) according to ServiceSeeking.com.au:

12. Plumber fees (tax-deductible)

The average rate for typical plumbing services according to ServiceSeeking.com.au:

13. Grounds maintenance including gardening and lawn mowing (tax-deductible)

According to Air Tasker, a gardener can cost between $50 - $300 per hour, while a lawn mower can cost $40-$50 an hour. 

14. Replacing furniture, carpets, curtains (generally not tax-deductible)

Prior to 2017, replacing items which tend to depreciate over time such as air-conditioning units, carpets, appliances, furniture was tax-deductible. Today, any items which were already part of an existing property that was purchased after May 9^th 2017, will have to be covered by the landlord and is no longer tax-deductible.

15. Travel to visit your investment property (generally not tax-deductible)

Every time you visit your property – whether it’s for maintenance, inspections or viewings, it’s costing you money in transport (unless you live within walking distance). These costs used to be tax-deductible up until July 2017, however now this is a bill absorbed by the property owner.

16. Dealing with issues such as mould, leaks, draughts (sometimes tax-deductible)

Home Advisor states that mould removal can cost anywhere between $50 to $6,000 depending on the square footage of the mould, and other contributing factors. Similarly, a leaky roof – if not repaired immediately, can lead to major structural damage, which could end up costing thousands to fix. These issues are all important factors that need to be addressed as soon as the problem occurs to avoid major damage in future. It's always beneficial to respond to your tenant's concerns as soon as they arise.

17. Advertising for tenants (tax-deductible)

Advertising involves a number of different components which all incur cost:

• Photography
• Copywriting
• Social media marketing spend
• Physical signage
• Newspaper/magazine inclusion

However, having your property marketed professionally can sometimes help your rental property gain tenants quicker. 

18. Legal fees (sometimes tax-deductible)

Legal fees are treated on a case-by-case basis as they all vary to some degree, therefore making it challenging to form a clear cut checklist. However, if you do incur legal fees from owning a rental property, it would be worth checking with the ATO to see if your expense is eligible for deduction.

For more information and to find out which expenses you are able to claim, visit ato.gov.au

Lead image: Luke van Zyl