Managing a rental property involves a range of expenses, and telephone costs can be part of these if they're directly related to managing the property. According to the ATO, expenses incurred while managing your rental property, including those for telephone calls, can be deductible if they relate directly to earning your rental income.
Under Division 8 of ITAA 1997, which covers general deductions, telephone costs qualify as a legitimate expense, provided they are incurred in the course of managing your rental property. This means any calls you make to tenants, property managers, or service providers concerning your property are potentially deductible. However, it's crucial to distinguish between personal and business-related calls, as only the latter are deductible.
A common misconception is that all telephone expenses are automatically deductible. This isn't the case. Only those calls that directly pertain to rental management activities can be claimed. For instance, calls made to discuss rental agreements, organise repairs, or communicate with your property manager are deductible.
To see how this plays out, consider a scenario where you own a two-bedroom apartment in Melbourne. Throughout the year, you spend about $30 monthly on calls related to managing your rental property. This includes calls to your property manager, tenant, and tradespeople. Over a year, this amounts to $360. If you are in the 37% tax bracket, this deduction can reduce your tax bill by $133.20.
In our experience reviewing thousands of properties across Australia, we often find that investors overlook these smaller deductions. Many fail to keep adequate records, missing out on potential claims. Additionally, some overestimate their deductible amount by not properly distinguishing between personal and rental-related calls. Another common oversight is failing to consistently update records, especially after changing phone plans or service providers.
The answer can differ depending on your situation. If you own the property jointly, only your share of the telephone expenses can be claimed. For properties held within an SMSF, different rules apply, and it's essential to consult with your SMSF advisor. If the property is part of a commercial venture, additional expenses might be deductible. Lastly, if you use a home office for managing your rental, you might also be eligible to claim a portion of your home phone line rental.
Given these nuances, it's wise to seek professional advice. A Chartered Quantity Surveyor can help you understand the full scope of deductible expenses, while your accountant can ensure these are correctly reported on your tax return.