Claimable Costs when Buying

There are several costs associated with buying a long-term investment property.  This is a summary of which expenses I consider to be tax-deductible and which expenses I do not.

Legal Fees - Deductible

Legal fees are tax deductible under a special tax law as long as your total annual legal fees are less than $10,000.

Builders Reports - Not Deductible

Builders reports are considered to be part of the cost to purchase a property and are not deductible.

Registered Valuations - Deductible

As long as the valuation is required to obtain finance, there is a special tax law that allows these costs of borrowing to be tax deductible.  If the valuation is only to determine the amount to offer, then it would not be deductible.

Travel - Not Deductible

Travel costs are considered to be part of the cost to purchase a property and are not tax deductible.  Travel costs would typically include vehicle costs for open homes and flights for property viewings.

Loan Fees - Deductible

As loan fees are charged when arranging finance, there is a special tax law that allows these costs of borrowing to be tax deductible.

LIM Reports - Not Deductible

LIM reports are considered to be part of the cost to purchase a property and are not deductible.  However, if your lawyer pays for your LIM report and then on- charges it to you, then you could claim it as deductible legal fees.

Due Diligence - Not Deductible

There must be income earned to claim expenses against, so any expenses incurred on a property purchase that doesn't eventuate will not be tax deductible.

Finders Fees - Not Deductible

A fee paid to source a property is considered to be part of the cost to purchase a property and is not tax deductible.

Mentoring & Educational Costs

Education that is directly in connection with sourcing a property is likely to be considered to be part of the cost to purchase a property and would not be tax deductible.  Education that relates to teaching you about managing your property, maximising rents and ongoing issues would be tax deductible.

I believe education is a grey area and how much you claim (100%, 50% or 0%) depends on how tax aggressive you want to be.

Disclaimer: The above article is general in nature and we recommend you seek professional advice tailored to your specific personal situation.