Investment property expenses: What to review for tax in Geelong

When preparing your tax in Geelong, taking a closer look at your investment property expenses can help you understand how your costs have changed, identify records that may be missing and ensure eligible rental property deductions are treated correctly. For property investors, comparing this year’s expenses with previous years can also highlight unusual increases in interest, insurance, repairs or property management costs before your income tax return is prepared.

CD&G Accountants provides income tax return services for investors and individuals in Geelong. Reviewing your rental income and expenses before your tax appointment can make the process more efficient and help ensure the information in your return accurately reflects your circumstances.

Why compare investment property expenses year on year?

Investment property costs rarely remain exactly the same.

Loan interest may move with interest rates, insurance premiums can increase, property management fees can change and a property may require more repairs in one year than another.

Comparing expenses with the previous financial year gives you a useful reference point. A large difference does not necessarily mean something is wrong, but it may prompt questions such as:

• Has your loan interest increased?
• Were there significant repairs during the year?
• Did your insurance premium change?
• Have property management or leasing fees increased?
• Was the property vacant for part of the year?
• Have any expenses been missed from your records?

This type of review can also make it easier to explain unusual movements when your accountant prepares your tax return.

Understand how rental property expenses are treated for tax in Geelong

Not every investment property expense is claimed in the same way.

The Australian Taxation Office explains how rental property expenses are claimed and separates them into three broad categories. Some expenses may be deductible in the year they are incurred, some are claimed over several years and others are not deductible.

Expenses that may qualify for an immediate deduction can include items such as:

• Interest on eligible investment loans
• Council rates
• Property management fees
• Insurance
• Certain repairs and maintenance
• Advertising for tenants

Other costs may need to be claimed over a number of years. These can include borrowing expenses, capital works and the decline in value of eligible depreciating assets.

The distinction matters. A repair to restore something damaged through normal rental use may receive different tax treatment from an improvement that changes or upgrades the property.

Your accountant can review the nature of an expense and determine how it should be treated in your individual tax return.

Take a closer look at repairs and maintenance

Repairs and maintenance are particularly worth reviewing because their tax treatment can depend on what work was completed and why.

The ATO generally distinguishes between work that maintains or restores an existing item and capital improvements that create something new or improve the property beyond its original condition.

For example, repairing damage arising while a property is being rented may be treated differently from replacing an entire asset or undertaking a substantial renovation.

When reviewing this year against previous years, a significant increase in repairs should prompt you to gather invoices and descriptions of the work. This gives your accountant enough information to determine whether the amount may be immediately deductible, depreciated or treated as capital expenditure.

Review your loan interest carefully

Interest is often one of the largest expenses associated with an investment property.

Rather than simply carrying forward last year’s figure, review your annual loan statements and confirm the amount actually incurred during the financial year.

It is also important to consider how borrowed money has been used. The ATO notes that rental expenses may need to be apportioned where an investment loan is partly used for private purposes.

For example, if funds from an investment loan were redrawn and used for personal expenses, the full amount of interest may not necessarily relate to producing rental income.

This is one reason maintaining clear loan records can be valuable when preparing a property investor tax return.

Has the property been available for rent all year?

Changes in occupancy can also affect the deductions available.

Generally, rental expenses may be deductible while a property is rented or genuinely available for rent. However, expenses may need to be apportioned if the property was used privately, rented at non-commercial rates or available for rent for only part of the year.

If your property was vacant for an extended period, underwent renovations or was temporarily used privately, let your accountant know.

Comparing rental income with previous years can help identify periods where income was unusually low and prompt a review of whether the property remained genuinely available for rent.

Consider whether a depreciation schedule is relevant

Some property investors may benefit from having a depreciation schedule prepared by a qualified quantity surveyor.

A depreciation schedule can provide information about eligible depreciating assets and capital works, helping your accountant determine deductions that may be available over time.

However, depreciation rules can be complex. Restrictions apply to certain second-hand depreciating assets in residential rental properties, and not every property or asset will receive the same tax treatment.

You can read more about depreciating assets in rental properties on the ATO website.

If you do not have a depreciation schedule, it may be worth discussing whether one is relevant to your property with your accountant.

Keep complete investment property records

Accurate records are essential when claiming rental property deductions.

Useful documents may include:

• Annual loan statements
• Property management statements
• Council and water rates
• Insurance invoices
• Repair and maintenance invoices
• Advertising and leasing costs
• Body corporate or owners corporation statements
• Depreciation schedules
• Purchase and settlement documents
• Records of capital improvements

Good records help connect each expense with the property and the relevant financial year.

The ATO provides guidance on records for rental properties and holiday homes, including how long records may need to be retained.

These records may also become important later if you sell the property and need to calculate a capital gain or loss. CD&G Accountants can provide capital gains tax advice where the sale of an investment property creates CGT consequences.

Looking at the numbers can reveal more than deductions

Reviewing investment property expenses should not be limited to asking what can be claimed.

Year-on-year comparisons can also provide a clearer picture of how the property itself is performing.

If expenses have increased substantially while rental income has remained relatively flat, it may be worth reviewing the property’s overall cash flow. Likewise, repeated maintenance costs, higher insurance premiums or increasing interest expenses may warrant closer attention.

Tax planning can help connect these financial changes with your broader position, particularly if you own more than one investment property or have other investment and business income.

Get your investment property information ready for tax time

Taking a little time to review your investment property expenses before preparing your tax return can make a significant difference.

Compare this year’s figures with previous years, investigate unexpected changes and gather the documents that support your rental income and deductions. This gives your accountant a clearer picture of your property and helps ensure expenses are treated appropriately.

For individuals and property investors looking for professional support with tax in Geelong, CD&G Accountants provides practical, personalised income tax return services and can help you review investment property income, deductions and related tax considerations.

To discuss your investment property or arrange an appointment for your tax return, contact CD&G Accountants.