Common Rental Property Mistakes

When claiming deductions for Rental Properties it is important to be aware of the following to ensure costly mistakes are avoided:

1. Stampduty on the transfer of the property is not a deductible expense but rather a cost of purchase, which is included in the cost base of the property for Capital Gains Tax purposes.

2. Borrowing expenses are not deductible in full in the year of purchase unless they total $100.00 or less. Where the total borrowing costs are greater than $100.00 they must be spread over the lesser of 5 years or the term of the loan.

3. Where a loan is used to purchase a rental property and also for private purposes the borrowing cost and interest costs must be apportioned and a deduction is only allowable for the portion that relates to the rental property.

4. A deduction is not allowed for the cost of improving a rental property or for initial repairs to a rental property. Each of these costs are capital in nature and therefore must be depreciated over the expected life of the improvement or repair.

For further information contact CTB & Associates