Did you know that certain rental expenses are eligible tax deductions? If you’re a landlord or property investor in Australia, you’ve likely wondered what a strata tax deductible expense is and if you can claim strata fees on tax. The answer is yes, but with some conditions. The Australian Taxation Office (ATO) permits the deduction of certain common property expenses from your rental income and increases your overall return on investment.
Depending on the nature of the work, these costs can be claimed differently by property investors or landlords who have directly paid for the expense and hold or use it as a rental. The ATO allows investors to apply immediate deductions or long-term capital works depreciation from strata fees and levies to repairs and maintenance work. However, not all costs are treated equally. Understanding what you can deduct and claim can help offset the expenses incurred while managing or maintaining your rental property within a strata, body corporate, or owners corporation scheme.
An immediate deduction can be applied for regular payments to the administrative and general capital works/sinking funds for anticipated services and expenses raised to help maintain and manage the building. However, claims cannot be made separately on items covered within these funds.
Immediate deductions cannot be made for one-off unexpected major work. These expenses are typically not covered by ongoing contributions and are often taken through a special levy or from strata funds. However, these costs can be claimed as a capital works deduction when the work is completed, based on the lot owner’s share of the expense.
An immediate deduction can be claimed for repairs made to rectify property damages, defects, or wear and tear whilst the property was being rented.
Expenses for preventative work or to fix existing wear and tear can be claimed in the income year you incur them.
Major structural works may potentially be claimed as a capital works deduction. This can typically be deducted at 2.5% or 4% per annum over 40 or 25 years.
Certain minor allowable equipment and fixture replacements may be claimed. However, major capital expenses may need to be deducted as a decline in the value of depreciating assets.
Initial repairs for defects and damages that existed when purchasing a property can not be immediately deducted unless they are capital works or depreciating assets. This instead forms part of the capital gains tax (CGT) cost base when you sell the property.
Immediate deductions can be claimed for pre-paid service in a future income year if less than $1,000 or for larger amounts when the service period is 12 months or less. Otherwise, the deductions are spread over the service period or 10 years, whichever is shorter.
Whilst most legal costs are capital expenses and are non-deductible, some specific situations can be claimed, including costs for court actions for rental income loss and defending damage claims.
Yes, as long as the property was genuinely available for rent during the period the expenses were incurred. This means it was listed at market rates and actively advertised to tenants. You can still claim strata fees, repairs, and interest on loans during vacancy timeframes that meet this condition.
Save all invoices, levy notices, and documentation of when the property was rented, vacant, or personally occupied.
Understand your annual budget’s administrative vs sinking fund contributions.
Staying in the property, even briefly, can reduce your claim proportionally.
It is important to distinguish between capital and repair costs to understand what type of deduction can apply.
It is best practice to engage a tax agent or property accountant to help accurately report and claim rental expenses.
Understanding the eligibility criteria is crucial for landlords and investors seeking to offset the costs of rentals. Visit the official ATO website to learn more about claiming rental expenses, keeping records, and declaring income.
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Whether you’re a seasoned investor or a new landlord, understanding your rental expenses can lead to significant savings at tax time. It is important to remember that not all strata costs are tax-deductible. Regular administrative levies, repairs, and maintenance costs may be immediately deductible, while special levies and improvements can be claimed over time through capital works deductions.
Distinguishing between these categories and keeping clear records to support your claims can help you optimise your investment and remain compliant with ATO regulations and recommendations.
This article is edited by Lauren Shaw Regional General Manager and Licensee-in-Charge on May 2025.
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