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Non-deductible rental property expenses
- Akuol Akuein
- Mar 25
- 2 min read
When owning a rental property, it's important to understand that not all expenses are tax-deductible. Non-deductible rental property expenses are costs that the Australian Taxation Office (ATO) does not allow you to claim as deductions against your rental income. These typically include personal or private expenses, capital costs, and certain travel or asset-related expenses. Being aware of what you cannot claim helps ensure compliance and avoids unexpected issues during tax time.
Some General Non-Deductible Expenses Include:
- Tenant-paid expenses (e.g. water, electricity).
- Private or holiday home expenses, including when the property is not genuinely available for rent.
- Vacant land holding costs (e.g. council rates, interest).
- Certain second-hand depreciating assets, unless you're an excluded entity or running a rental business.
- Travel expenses related to property inspection before purchase or for maintenance/rent collection.
- Asset relocation costs between rental properties.
- Seminars and workshops related to property investment.
- Personal use costs for a holiday home rented part-year.
- Expenses on non-income-producing properties used as loan collateral.
Travel Expenses - Deduction Restrictions
- You cannot claim travel costs for inspecting, maintaining, or collecting rent from a residential property, including related meals and accommodation.
- Exceptions apply for corporate tax entities, public unit trusts, managed investment trusts, and super funds (excluding SMSFs).
Second-Hand Depreciating Assets
- You cannot claim deductions for the decline in value of second hand depreciating assets in residential rental properties unless you're in business or an excluded entity.
- Examples: used appliances or furniture.
Acquisition & Disposal Costs - Not Deductible but Depreciable
- Property purchase cost
- Buyer's agent fees
- Conveyancing costs
- Bank guarantee fees
- Advertising to acquire a property
- Stamp duty on property transfer (note: lease stamp duty may be deductible)
These costs are not deductible but may be included in the cost-base depreciation over the life of the asset or on the CGT cost base at disposal of asset.
Contact Integrous Accounting Services:
Phone: 08 9328 1019 | Mobile: 0414 300 098
ABN: 74 684 002 104
Address: Level 3, 1060 Hay Street, West Perth, WA 6005
Further Details - ATO References
Rental Properties Guide: https://www.ato.gov.au/forms-and-instructions/rental-properties-2024
Travel Expenses for Rental Properties: https://www.ato.gov.au/individuals-and-families/investments-and-assets/property-and-land/residential-rental-properties/rental-expenses/rental-properties-and-travel-expenses
Depreciation Rules for Rental Properties: https://www.ato.gov.au/individuals-and-families/investments-and-assets/property-and-land/residential-rental-properties/rental-expenses/depreciating-assets-in-rental-properties
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