The investment property fees and charges you can claim on tax

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If you own a rental property, you can claim a deduction for any borrowing expenses that you incurred in arranging finance to purchase it.

These are costs (over and above the normal tax-deductible interest on the loan), such as:

  • Loan establishment fees
  • Lenders mortgage insurance (insurance taken out by the lender and billed to you)
  • Title search fees charged by your lender
  • Costs for preparing and filing mortgage documents (including legal fees)
  • Mortgage broker fees
  • Fees for a valuation required for loan approval and
  • Stamp duty charged on the mortgage.

investment property fees and charges you can claim on tax

If your borrowing expenses are $100 or less, you can claim the full amount in the income year you incur the expense.

Where your total borrowing expenses are more than $100, you spread the deduction over the shorter of either five years or the term of the loan.

If you obtained the loan part way through the income year, you need to adjust your claim according to the number of days in the year you had it.

You can claim a deduction for the balance of the borrowing expenses in the final year of repayment if you either repay sooner than the term of the loan or repay it in less than five years.

There are a number of expenses that can't be deducted, including:

  • stamp duty on the transfer of the property title (unless you live in the ACT, where it is deductible) - this is added to the capital gains tax cost base of the property
  • life insurance premiums associated with the loan and
  • borrowing expenses where the loan is taken out for private purposes (for example, it is used to purchase your family home).

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Mark Chapman is director of tax communications at H&R Block, Australia's largest firm of tax accountants, and is a regular contributor to Money. Mark is a Chartered Accountant, CPA and Chartered Tax Adviser and holds a Masters of Tax Law from the University of New South Wales. Previously, he was a tax adviser for over 20 years, specialising in individual and small business tax, in both the UK and Australia. As well as operating his own private practice, Mark spent seven years as a Senior Director with the Australian Taxation Office. He is the author of Life and Taxes: A Look at Life Through Tax.