Helpful info

What can you tax deduct in a newly constructed house

It’s worth being aware of the tax deductions available to you as an investor, and investors in newly constructed properties have particularly attractive tax deduction opportunities available to them which we discuss below. 

1. Mortgage interest and loan costs

This is almost always the biggest tax deduction opportunity available to property investors of new or old properties, and it can add up to a significant saving on your tax bill each year. For example, assuming you have a $600,000 mortgage on an investment property with a 3% interest only mortgage, you would be paying $15,000 p.a. in interest costs. That entire $15,000 of interest can be claimed as a tax deduction, along with all your other loan costs such as mortgage fees. 


2. Rental expenses

Owning an investment property means you must pay for a whole range of services which can be claimed as tax deductions. For example, you can claim for the following costs:

  • Property agent fees and commissions;
  • Property repairs and maintenance;
  • Insurance;
  • Pest control;
  • Gardening;
  • Land tax;
  • Cleaning;
  • Water rates;
  • Council rates;
  • Body corporate fees;
  • Advertising for tenants.

This is a longer list than many people realise and can add up to thousands of dollars a year. However, for newly constructed home buyers, some of these costs are likely to be low to non-existent – for example property repairs and maintenance. 


3. Depreciation of buildings and fittings

When your newly constructed home is completed, investors are well-advised to arrange for a tax depreciation schedule to be completed. This will provide guidance regarding how much you can claim each year for depreciation of the buildings and fittings on your property. On a typical newly constructed home, depreciation deductions are generally at least $5,000 per annum.


4. Holding costs

This is an area of tax deductions which may people are not aware of. You can basically claim for all costs related to owning the land before your house was built. This can include interest payments, so it’s another potentially significant deduction. 


5. Accounting costs

All accounting fees and charges are tax deductible.


Jim Dionysatos, Landen’s Director, advises clients to learn about newly constructed house tax deduction opportunities within the context of a broader property investment strategy: 

‘These five main types of tax deductions can add up to tax deductions for most investors in newly constructed properties, and can create additional upside to their investment cases. We advise our clients to familiarise themselves with these opportunities so they are maximising their upsides as investors.’