Bundoora is a strong rental market — proximity to La Trobe University keeps demand high and vacancies low. If you own an investment property here, the way you handle tax can make a difference of thousands of dollars a year. This guide covers the deductions you can claim, how depreciation and negative gearing work, and the areas the ATO is scrutinising most closely.
First, declare all your rental income
You must include the full rent you receive, plus any related income such as bond money you retain, insurance payouts and reimbursements from tenants. The ATO now data-matches against property managers, sharing platforms and banks, so under-declaring — even accidentally — is easily detected.
Deductions you can claim
Against that income you can offset a wide range of expenses, including:
- Interest on the loan used to buy the property (usually the largest single deduction).
- Council rates, water rates and land tax.
- Body corporate or strata levies.
- Landlord insurance and building insurance.
- Property management and letting fees.
- Repairs and maintenance that return the property to its original condition.
- Advertising for tenants, and pest inspections.
- Borrowing costs such as loan establishment fees (spread over five years).
A key distinction: repairs (fixing a broken fence) are deductible immediately, but improvements (replacing that fence with a better one, or renovating a kitchen) are capital works, claimed gradually through depreciation.
Depreciation — the deduction people forget
Depreciation lets you claim the natural wear and tear on the property without spending fresh cash. There are two parts. Capital works deductions cover the building's structure at 2.5% a year for properties built after 1985. Plant and equipment covers removable assets — ovens, carpet, blinds, hot-water systems — which decline in value over their effective life. A quantity surveyor's depreciation schedule typically pays for itself many times over in the first year.
How negative gearing works
A property is negatively geared when its deductible costs (including loan interest) exceed the rent it earns. That loss can generally be offset against your other income — your salary, for example — reducing your overall tax bill. The strategy relies on the expectation that capital growth will outweigh the yearly shortfall over time.
A note on change: negative gearing and the capital gains discount have been the subject of recently announced federal reforms. Rules in this area can shift, and any change would typically affect future purchases rather than existing arrangements. Because the detail matters and timing is everything, speak to an accountant before making a decision based on gearing.
Capital gains tax when you sell
When you sell, any profit is a capital gain added to your taxable income for that year. The good news: if you have held the property for more than 12 months, you generally qualify for the 50% CGT discount, halving the taxable gain. Keeping every record of purchase costs, capital improvements and selling expenses is essential, as these all reduce the gain.
What the ATO is watching
Rental income and deductions are a standing ATO priority. Common red flags include claiming 100% of interest when part of the loan was redrawn for private use, claiming improvements as immediate repairs, over-claiming on a property that was only available to rent for part of the year, and claiming for a holiday home not genuinely available to tenants. Getting these right the first time avoids amendments, interest and penalties.
Records every landlord should keep
Good records are what turn legitimate deductions into painless claims. Keep your annual loan interest summary, every rates and levy notice, insurance and management statements, and invoices for repairs and improvements. Hold onto the contract of purchase and sale, along with conveyancing and stamp-duty documents, because these feed into your future capital gains calculation. If you have a depreciation schedule, keep it with your tax file. The ATO expects you to retain records for five years after you lodge — and for CGT purposes, for as long as you own the property plus five years after you sell.
Co-owned properties
If you own the property with a partner, income and deductions must be split according to your legal ownership share — usually 50/50 for joint tenants — regardless of who actually pays the bills or earns more. Getting the split wrong is a frequent and easily avoided error, and one worth confirming with your accountant before you lodge.
Talk to a Bundoora property tax specialist
Investment property tax rewards attention to detail. RPS works with landlords across Bundoora and Melbourne's north to claim every legitimate dollar while staying firmly on the right side of the ATO. As your local tax accountant in Bundoora, we can review your property this financial year — book online or call 1300 110 120.
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