landlord tax deductions

How Do Landlord Tax Deductions Work?

Ben Williams

Australia’s Real Estate landscape has cultivated a thriving investment market over the past 30 years. This boom has, in turn, shaped how the government treats landlords and property owners, with special incentives put in place to assist both buyers and those that are renting out their properties. With that said, many homeowners aren’t aware of the landlord tax deductions that are available to them, which means they could] be losing out on a considerable amount of money each year unnecessarily.


My Rental is dedicated to providing landlords with the knowledge they need to make informed decisions about their properties. So, what landlord tax deductions are available to Australian property owners?


How Do Tax Deductions Work?

Generally, tax deductions are expenses that you have accrued in the process of earning income. Under certain criteria, the value of your expenses can, therefore, be reduced from your taxable income. An example of these deductible expenses would be a work uniform, which is a necessary purchase in the process of you earning future income.


So, How Does This Relate to Landlord Tax Deductions?

Understanding why certain things are tax-deductible allows you more insight into which expenses you may be able to claim. For rental properties, only your expenditure that is specifically related to the production of income can be deducted. In other words, if your house is vacant and not on the rental market, you will not be able to claim any of your expenses as landlord tax deductions.


This means that a property can go back and forth between deduction approval depending on its status at the time. If you, for example, live in your property for half of the year before renting it out for the other six months, expenses are only deductible for the six month period in which it has been rented.


With that said, these deductions are still available whether you have active tenants or not. As long as your property is genuinely available for rent, expenses will still be considered applicable to income production, and should, therefore, be deductible. According to the ATO, claiming periods can generally be broken down into two categories:


  1. Your property is actively rented out.
  2. Your property is not currently rented out, but steps have been taken to ensure it is available for rent, such as being advertised on rental portals, or if it can be proven that tenants are likely to rent the property.


It’s also important to consider whether your property is fully or partially rented out. If you are only renting out a room, for example, you will only be able to claim tax deductions on that particular area of your house.


What Constitutes Steps Being Taken to Ensure Rental Availability?

Naturally, with a process like this, there will inevitably be people looking for loopholes, which is why there are situational factors considered when determining eligibility. If it is found that you are intentionally making the property undesirable to tenants, or only advertising with extremely limited exposure, such as at work or by word-of-mouth, you won’t be eligible.


This ineligibility also goes for properties that are asking far above the average rent of similar or comparable properties in the area or setting unrealistic conditions/guidelines on prospective tenants. If your property doesn’t allow for children or pets, it is unlikely that landlord tax deductions will apply to you.


While it may seem obvious, these restrictions also apply to landlords that refuse prospective tenants without giving adequate reasonings.


It can be challenging to determine your eligibility for landlord tax deductions. Still, by understanding the process that goes into determining this eligibility, it should help you to make informed decisions about your expenses. It just goes to show that being a landlord isn’t always easy, so why not let us help out? At My Rental, we are passionate about offering Australian landlords a more innovative approach to property management. To see what we can do for you, contact us today, or stay up-to-date with our property management blog for more information on the Australian property market.

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