Deductions you can and can’t claim

What you can claim

The following expenses can be deducted from your rental income:

• rates and insurance
• interest paid on money borrowed to finance your property
• agents fees and commission relating to the rental of the property
• repairs and maintenance (except if they substantially improve the property)
• motor vehicle and travel expenses
• legal fees for arranging the mortgage or finance to buy the property
• from the 2010 income year and beyond:
  •  legal fees for buying and selling a property can be deducted. This is provided your total legal expenses for the income year, including the fees associated with buying and selling a property, are equal to or less than $10,000. 
  • before the 2010 income year legal fees for buying and selling a property are not deductible
• mortgage repayment insurance
• accounting fees for the preparation of accounts
• depreciation on the building prior to the 2011-2012 income year.

If you are a residential rental dealer or speculator as well as the above expenses you can also claim the cost of the property in the year you sell it.

What you can't claim

Capital or private expenses can't be deducted from your rental income. Capital
expenses are costs you incur to buy or increase the value of a capital asset.

Private expenses are incurred for your own benefit and are not connected with
producing taxable income.

The following are non-deductible expenses:

• the purchase price of a rental property
• the capital part of any mortgage repayment(s)
• interest on money which you borrow for some purpose other than financing the rental property, even if you use the rental property to secure such a loan
• any repairs and maintenance that go beyond replacement and are in fact improvements to the property
• real estate agent's fees incurred as part of buying or selling the property
• the cost of making any additions or improvements to the property.
• depreciation on the building from the 2011-2012 income year.

For the 2009-2010 income year and beyond, a deduction is available for legal expenses incurred in acquiring a capital asset that is used to derive taxable income. This is provided your total legal expenses for an income year are equal to or less than $10,000.

Date published: 30 Jul 2010

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