What is a rental expense?
When you own a rental property you can claim deductions for certain expenses.These expenses can only are only deductible for the period the property is rented or available for rent. Expenses of a capital or private nature cannot be claimed as an expense, although you may be able to claim a decline in value deduction for capital expenditure.
There are three types of rental expenses:
- deductions that cannot be claimed (expenses borne by your tenants, travel to inspect before purchase of the property, acquisition and disposal costs of the property).
- expenses that are an immediate deduction in the income year (advertising for tenants, bank charges, council rates, insurance, pest control etc).
- deductions you can claim over a number of income years (borrowing costs, amounts for decline in value of depreciating assets, capital works deductions).
There may be a time when not all expenses are deductible. There may be a situation when the expense needs to be apportioned. For example if your rental property is only available for rent for part of the year, only part of the property is used to earn rent or your rent the property at non commercial rates. The percentage of apportionment will need to be calculated.