Rental expenses can be a complex area of tax in Australia.

A lot of ambiguity surrounds to the correct taxation of rental expenses. The Australian Tax office reserves the right to deny expenses as it may deem rightful.

This article will give you a brief idea to what expenses cannot be claimed.

To begin with, the cost of the purchase of land is not deductible. The cost of construction and claiming capital improvements cannot be claimed as an immediate deduction, but can be depreciated over time.
Also, the conveyancing costs which are treated as legal expenses, are not an allowable expense for the taxation of rental properties. Most legal costs are of a capital nature, and so must only be applied to the cost base of the asset purchased.
A common mistake taxpayers often make is to claim all the borrowing expenses in the beginning year and forgetting to split the expenses between partners co-owning a rental property.
Barring this, most of the expenses can be claimed but the taxpayer has to maintain correct and adequate records in order to claim a deduction against their rental properties.

The tax office requires you to keep records of rental income and expenses for five years from the date of lodgement.
Furthermore, records for the proof of ownership and cost associated with purchasing and selling of the property needs to be retained for the same period of time.

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