Claiming cleaning costs for your rental property is not only permissible but is also a practical way to reduce taxable income on your investment property. The Australian Taxation Office (ATO) allows landlords to claim deductions for expenses incurred in the process of maintaining their rental properties, provided these expenses are directly related to earning rental income.
Under the ATO's guidelines, cleaning costs are considered a deductible expense. This includes the cost of hiring professional cleaners or purchasing cleaning supplies if you do the cleaning yourself. The key requirement is that these expenses must be related to the rental property and incurred during periods when the property is available for rent.
A common misconception among landlords is that all cleaning costs are deductible regardless of when they occur. However, personal cleaning costs or those related to periods when the property is not available for rent are not deductible. It’s crucial to distinguish between cleaning for maintenance purposes and cleaning for capital improvements, as only the former is deductible.
To see how this plays out, consider a practical example. Suppose you own a 2-bedroom apartment in Melbourne, which you rent out for $600 per week. You hire a professional cleaning service to clean the property after each tenant vacates, costing $150 per clean. Over the year, you incur $600 in cleaning costs. Assuming a 37% marginal tax rate, these cleaning expenses would reduce your taxable income by $600, resulting in a tax saving of $222.
In our experience reviewing thousands of properties across Australia, we find that landlords often miss claiming cleaning expenses simply because they do not keep adequate records. Another common oversight is failing to distinguish between cleaning costs that are immediately deductible and those that are capital in nature. Additionally, some landlords mistakenly attempt to claim personal cleaning costs, which the ATO will not allow.
The answer can differ depending on your situation. For instance, if your property is part of a short-term rental service like Airbnb, the cleaning costs might also include additional services such as linen changes. These are typically deductible as long as they are directly related to earning rental income. However, if the property is not available for rent for part of the year, you cannot claim cleaning expenses incurred during that period. Similarly, if you own the property through a self-managed super fund (SMSF), different rules may apply, and it's advisable to seek professional advice.
Given the nuances involved, it is wise to consult both a Chartered Quantity Surveyor and an accountant to ensure you claim the maximum allowable deductions without falling afoul of ATO regulations. They can offer tailored advice based on your specific circumstances, ensuring compliance and optimising your tax position.