Being a landlord is like going to a dentist - you'd rather not deal with it, but you know you have to. Rental income? Yes, that's a nice tooth! Property expenses? Ouch, that's a cavity!

Picture this. You're sitting comfortably, counting your rental income, and then BAM! You realize you have to report it as income on your tax return. "Well, that's just swell!" you exclaim sarcastically as you pour yourself another cup of regret. But wait! You remember you can claim expenses as deductions! The pendulum of fortune swings back.

"Life is simple," you think. Spoiler alert: It isn't. Not when it comes to tax and property anyway.

And just a reminder, you are a landlord in the ATO's view if you rent out a room, if you AirBnB a room or your entire house (this is the case even if you only AirBnB it when you are on holidays) and if you have a granny flat.

AND on top of that the ATO are cracking down on holiday homes where you try to claim 100% of the expenses but use it personally or don't have it available for rent 100% of the time.

So what are the general expenses I can claim each year?

Let's talk expenses. To claim them, your property needs to be rented or at least available for rent. The landlord equivalent of "dress for the job you want, not the job you have".

So what can you claim.......

• Advertising for tenants - because playing matchmaker for humans and houses costs money
• Bank charges - because banks gotta eat too, right?
• Body corporate fees - those strata nasties
• Cleaning expenses - unless you have a magical house-elf, you're footing this bill
• Council & Water rates
• Insurance - Because sometimes, things catch fire. And sometimes, things flood
• Interest on your loan for the purchase of the property - there should be a wild red alarm bell here as you can only claim the cost of interest on the loan for the 'rental' property, NOT when you refinance for your own house purposes (another ATO interest area this year)
• Land tax - don't get us started on this tax
• Pest control services - we live in Australia after all
• Gardening & lawn mowing services
• Property or agent fees - if you've outsourced the management of the property
• Software costs for keeping tabs on income & expenses (more on that below)
• Depreciation costs - because everything has a shelf life, even your shiny new hot water system
• Repairs and maintenance*** (refer Repair vs. Capital below)

What is Depreciation?

Anything you purchase for your property that costs more than $300 or is a fixture for your Property you can't claim as a deduction up front. Say what? Yep that's correct, you can't claim your shiny new hot water system in the year you purchase it, however you can depreciate the purchase, ie split the bill over a number of years. Depreciation costs are broken up into two areas:

1. Plant and equipment you buy for the property - ie air conditioners, blinds, carpet, hot water systems
2. Capital allowances - the actual building

In order to claim all your depreciation deductions you need an expert to produce you a Tax Depreciation Schedule. It's like a golden ticket to your tax deductions and MCG Quantity Surveyors are your Willy Wonkas! Plus, the cost to produce the schedule is tax-deductible. Jackpot!

I've just completed a stack of repairs. Can I claim all of those?

It depends.

If you have just purchased the property and spent $$$ before the tenants move in, you can't claim that this year. In fact those costs get added to all the other purchase costs (the actual house price, stamp duty, lawyers fees) and claimed when you sell the property.

If you have completed a renovation, installed a new fence, a new kitchen etc these costs are also not classed as repairs so you can't claim them this year. You can instead claim them as part of your depreciation deductions.

But regular wear and tear repairs, like replacing guttering after a storm or fixing plumbing, are claimable right away. So is general maintenance like oiling a deck.

So one of 2 things will happen:

1. The cost will be classed as repairs & maintenance so you claim it in the year you pay for it
2. The cost will be classed as a capital cost. It will be added to the purchase price of the property and you will claim it when you sell OR you claim a depreciation deduction over the next few years.

You talk about Software Costs? What are these?

There are a stack of really awesome tools available to help you keep track and take control of your rental properties. The cost of buying this software is all tax deductible to you.

You could use something like Xero to track all those costs, or one of the hundred landlord apps currently on the market.

If you have any of these tools you just need to invite Growthwise into your subscription and we can generate all the year end reports we need to complete your return.

I've just purchased a Property. What can I claim?

If you've just bought a property, the purchase costs are not an immediate deduction. They're like a fine wine, maturing until you sell the property.

Let's look at an example.

You purchase a property for $450,000. On top of this you have to pay for legal fees, a building & pest inspection, stamp duty and the costs to setup your loan. All of these costs with the exception of the costs to setup your loan get added together and claimed when you sell the property, not in the year you purchase it.

The costs to set up your loan can be claimed over a five-year period. A bit like paying off a really expensive piece of furniture.

I've just sold a Property. What happens for tax purposes?

What happens when you sell a property? That's when the taxman cometh, demanding capital gains tax. Capital gain is the difference between the price you sold for and the cost base (the purchase price plus all costs at purchase and sale). Think of it as a yard sale where the government takes a cut.

Other things to watch out for......

The contract date is the date you sell the property not the settlement date. So you need to be really careful to ensure the capital gain is declared to the ATO in the correct year.

If you have held the property for more than 12 months you will be entitled to use the 50% Discount Method. That means if you make a capital gain of $100,000 you will only pay tax on a gain of $50,000. Boom! Tax on only 50%, we all like that.

This area is quite complex and you always want to ensure you are claiming everything you can. Therefore when you sell a rental property we need to ensure we get the settlement statement for both the purchase and sale as well as the cost any other major renovations you have undertaken during those years that you haven't already got in a depreciation schedule.

It's super important that you keep ALL your records for everything to do with rental properties, otherwise you are sure to be paying the taxman more than you need to.

Ok got all of that. What do I need to send to you to ensure I am claiming everything?

That all depends on how and who manages your property.

If you are using software tools above just invite Growthwise as a user and we can download all of the reports needed.

If you have a real estate agent manage the property we will need the summary provided by them showing all the Income and Expense break up + anything else you have personally paid for - i.e. Interest on your Loan.

If you manage the property yourself then we will need a summary of all Income and expenses paid for the property. We have a simple spreadsheet you can use to summarise everything.

Don't forget if you have purchased a property this year we will need all of the purchase documentation to ensure we have your correct cost base. That means we need your settlement statement + any other paperwork re the purchase.

I'm ready for tax time or I have more questions

And finally, if tax time gives you the heebie-jeebies, don't sweat it. The Growthwise gang is here to help.

If you're rearing to tackle tax time or if you've got more questions, crack on and check out our FAQ's. This will help you send us your information, book an appointment, and understand how things roll at Growthwise.

That's all, folks! We're done and dusted. We hope this tax romp has been as fun for you as a kangaroo on a trampoline. Now, go forth and conquer those taxes.