Tax benefits are one of the key reasons why the average Aussie mum and dad invest in property and with a new financial year upon us, such benefits have come to the fore yet again.

While such advantages have dived in Victoria, landlords in other states and territories can still claim a wealth of investment-related costs and enjoy a minimal tax bill.

NB: these benefits are only up for grabs when the property is tenanted or genuinely available for rent.

And of course, you must provide records, or proof, for these claims.

Investment property: costs you can claim

• body corp fees; 
• council rates; 
• utility bills; 
• pest control;
• interest on mortgage loans; 
• tenant advertising;
• land tax (NB: this tax varies between states and territories);
• property management costs (ie agent fees);
• insurance costs;
• repair and maintenance costs (see Building and Appliance Depreciation);
• mortgage insurance fees;
• legal expenses (ie evicting a tenant etc);
• loan establishment fees; and
• mortgage broker fees

Building and appliance depreciation 

Any building - no matter how well it was built - will experience general wear and tear over time. 

Investors can therefore claim a depreciation deduction on their property investment - otherwise known as a capital works deduction; however, the deduction amount depends on when the property was built.

If it was built after September 15, 1987, investors can claim a 2.5% annual depreciation for 40 years.

Similarly, new or existing appliances such as air conditioners, dishwashers, carpets and curtains can also be claimed as a tax break, as can repairs and maintenance - but again, different rules and regulations apply for such claims.

Some of these benefits can be claimed in the same financial year while others must be claimed over several years.

Talk to your accountant or the Australian Tax Office (ATO) if you're unsure about such issues - and whatever you do, keep all invoices and/or proof of these changes.

Positive and negative gearing

As we discussed earlier this year, positive gearing is when your investment property makes you money.

Or, as NAB puts it, a positively geared property investment generates positive cash flow due to the rental income being higher than your rental expenses (ie interest, maintenance, rates and insurance).

While positive gearing means you'll enjoy extra income from Day 1 on your investment, be aware that this same income will be taxed - along with your usual rental and wage income.

Negative gearing occurs when a property's expenses outweigh the owner's investment income ie the landlord loses money on their investment.

Yet the advantage to negative gearing is that investors may be able to claim such rental losses as a tax deduction.

Or, as the ATO explains,  you can claim deductions for rental expenses against your rental and other income, such as salary, wages or business income.

ATO: Top 10 Tips for Property Investors

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