As a property investor in Australia, understanding what costs you can claim as tax deductions is crucial for maximising your investment returns. One common query is whether gardening and lawn mowing expenses are deductible. The ATO allows deductions for expenses that are necessary to maintain your rental property in a suitable condition for tenants.
Under the ATO's guidelines, gardening and lawn mowing costs are considered legitimate tax-deductible expenses, provided they are directly related to the upkeep of your rental property. These costs fall under the category of maintenance expenses, which are necessary to ensure the property remains in good condition and attractive to potential tenants. This means that routine gardening tasks such as lawn mowing, hedge trimming, and general garden upkeep can be claimed.
However, a common misconception is that any gardening expense can be claimed. It's important to differentiate between maintenance and capital improvements. Maintenance refers to work done to prevent or fix deterioration, while capital improvements enhance the property's value. Only maintenance costs are immediately deductible.
Take a practical example of a landlord with a 3-bedroom rental property in Melbourne, valued at $850,000. If they spend $1,200 annually on gardening services to maintain the lawns and gardens, and their marginal tax rate is 37%, they could reduce their tax bill by $444 each year. This deduction can significantly impact the property's cash flow, making it more financially viable.
In our experience reviewing thousands of properties across Australia, we often see investors overlook the potential of claiming gardening costs. Many assume these expenses are too minor to warrant claiming or mistakenly classify them as capital improvements. Additionally, some investors fail to keep detailed records of these expenses, which can lead to missed deductions during tax time.
The answer can differ depending on your situation. For example, if the property is used for both private and rental purposes, only the portion of gardening costs related to the rental use is deductible. Similarly, if the property is a holiday rental, the deductions may vary based on the period it is available for rent. For properties purchased after 9 May 2017, ensure any plant and equipment are new to claim depreciation under Division 40.
Navigating the nuances of tax deductions requires careful attention to detail. Engaging a Chartered Quantity Surveyor and an accountant can provide clarity and ensure you're claiming all eligible expenses. A QS can help distinguish between maintenance and capital improvements, while an accountant can assist with accurate record-keeping and tax reporting.