Landlords -

What expenses can you claim for?

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Many landlords are not aware of deductions that can be made on your rental from a taxation perspective. It is also recommended that you operate a separate bank account for your rental property to track all your incoming rents and outgoing expenses. This makes it easier at the end of the financial year for all your costs to be picked up when finalising your tax returns. Please keep all invoices for expenses paid.

We recommend you engage an Accountant for advice for your particular situation.

Please refer below a list of expenditure, that may be claimed in order to assist you gain the best possible return for your investment.

Accounting Fees:

You can claim 100% of the cost of your annual accounts to be finalised with the Inland Revenue Department and for any ongoing advice. However, any costs involved in the initial set up of your rental costs are not deductible.

GST:

GST is not charged on residential rent. When your accounts are prepared at the end of the financial year, any costs that include GST are 100% full deductible in your end of year accounts. Please refer to your accountant for advice.

Insurance and Rates:

You can claim 100% of the full cost of your rental property’s insurance and the council rates associated with the ownership of your property.

Interest:

You can claim the interest charged on your mortgage, only if it is directly related to the purchase of the property and any repair work (e.g.loan for a new roof). You cannot claim interest for anything that is other than directly related to the rental property (i.e. personal purchase). Please refer to your Accountant for recent legislation changes.

Legal Fees:

You cannot claim legal fees charged as buying or selling the property, that is over $10,000 in any given year, with the only exception being if you are in the business of renting properties. Please confer with you Accountant for advice in this area.

Property is Vacant for part of the year:

If your property is not available for rent for the full year, you can not claim 100% of the annual costs i.e. rates; insurance; interest

Property Manager’s fees and commissions:

You can claim 100% of the fees or commissions paid to your property manager, who works on your behalf, collecting rent, finding tenants etc.

Repairs and Maintenance:

You can claim back any costs incurred for repairs and maintenance. However, if you are doing the work yourself, you can only claim the costs of materials and not your own time. If the work is more of an improvement to the property, (not a repair), then you can’t claim the cost of the repair as an expense.  We suggest you confer with your Accountant if the work is an improvement or a repair.

Other costs you may be able to include:

  • Body Corporate Fees

  • Tenant Gifts

  • Valuation Fees

  • Land & Water Rates

What is Depreciation:

You cannot claim deductions for capital expenses, private expenses or expenses that do not relate directly to your rental property.

Capital expenses are costs of to improve the value of your property. The IRD in many instances allow a landlord to expense a portion of the original cost annually, called “Deprecation”. This is an allowance you can claim to cover the costs of wear and tear on large value items (furniture etc) in your rental property.

Depreciation can not be claimed on buildings as on April 2011. Prior to this, the IRD would allow depreciation on the building value of your rental.

It is prudent to refer to your Accountant for sound advice.

Note: the information contained in this document is of a general nature and has been designed as a guide only for landlords. All information is correct at the time of printing, but the Inland Revenue has the right to review rules around taxation deductions all the time. We strongly recommend that you seek the advice of a Chartered Accountant to ensure you receive the most up to date information regarding your investment portfolio.