Claim expenses

Claiming expenses on your rental property

As an owner of rental property in NZ you can claim a variety of expenses at tax return time which is good news for your bottom line. These must relate to the costs of generating rental income, and must not include costs for private use.

Expenses you can claim

Insurance and rates

You can claim the cost of insuring your rental property and the rates for the property.

Interest

You can claim the interest charged on money you've borrowed to buy your rental property. However, if you:

  • borrowed part of the money for another purpose, or
  • topped up the mortgage for another purpose, for example to consolidate debt or to buy the house you live in

you can only claim the interest that relates directly to the rental.

Fees and commission

You can claim fees or commission paid to agents who collect the rent, maintain your rental, or find tenants for you.

Fees paid to an accountant

You can claim the fees for:

  • your accounts to be managed
  • tax returns to be prepared, and
  • advice

but not the costs involved in setting up your rental property.

Repair and maintenance costs

You can claim the costs for any repairs to the property or general maintenance. However, if you're doing the work yourself you can only claim for materials - not your time.

If the work is more of an improvement than a repair then you can't claim the cost as an expense.

The distinction between repairs and improvements can be tricky, especially if the property is a "leaky" property.

If you're unsure whether work done on your property is repairs or maintenance we suggest you talk to a tax agent.

Find out more about repairs and improvements to leaky properties

Motor vehicle expenses

You can claim for motor vehicle expenses, such as running costs for travelling to inspect your property or to do repairs. There are two options for claiming motor vehicle expenses - you can either use our kilometre rates or claim a percentage of the total running costs and depreciation.

Find out more about kilometre rates
Find out more about running costs

Expenses you can't claim

You can't claim deductions for capital expenses, private expenses, or expenses that do not relate to your rental.

Capital expenses are the costs of buying a capital asset or increasing its value, for example the cost of buying the property and making improvements. Private expenses are things you buy or pay for that are for your own benefit, rather than to generate rental income.

Expenses you can't deduct from your rental income in your tax return:

  • the purchase price of a rental property
  • the capital portion of mortgage repayments
  • interest on money you borrow for any purpose other than financing a rental property
  • the costs of making any additions or improvements to the property
  • the costs of repairing or replacing any damaged part of the property, if the work increases the property's value
  • real estate agent fees charged as part of buying or selling the property

If you live in the property

You can't claim for expenses that relate to your personal living costs. For example, if you move into your rental property after not being able to find tenants.

If you're living in a family home that was bought or transferred to a company, partnership, or trust which you own or control, you need to be very careful about claiming expenses. If in effect you're renting the property to yourself, we could view these claims as tax avoidance and you could face penalties, even prosecution.

Legal fees

Ordinarily, you can’t claim a deduction for legal expenses incurred in buying or selling a rental property, as these are capital expenses. However, where your total legal fees for the year are $10,000 or less, you can claim a deduction for legal expenses involved in buying a rental property. If you’re in the business of providing residential rental accommodation, you can also claim legal fees incurred in selling a rental property.

 


What expenses should I be claiming for on my investment property?

Do you want to reduce your end of year tax bill and increase your yield on your investments? We want to help ensure you know what expenses you are able to claim to reduce your costs and increase your profits. This will require good record keeping so ensure you make a plan at the start of the new business year to have everything you need come tax time.

Insurance and rates

  • Insuring your rental property is a must, and what’s even better is that you are able to claim back the cost of this on your end of year tax amount. The rates for your property are also an expense you can claim.

Interest

  • The interest that you get charged on money you borrow for your rental property is able to be claimed back. However, this excludes any money which was borrowed for another purpose or if the mortgage is topped up for another purpose.

Fees and commission

  • If you have decided to have your property managed by a rental company you are able to claim the fees/commission paid. If you don’t use management services but pay letting agents to find you a tenant this is also able to be claimed on.

Accountant fees

  • Unfortunately the costs involved in setting up your rental property are not able to be claimed however you can claim for your accounts to be managed, tax returns to be prepared and advice.

Repair and maintenance costs

  • General maintenance to your rental property is able to claimed however if you are carrying out the work yourself, then only the materials can be claimed – not the labour.
  • If the work being carried out isn’t classed as a repair, but more of an improvement or upgrade then this cannot be claimed as an expense.

Motor vehicle expenses

  • The running costs of travelling to inspect your property or carryout repairs can be claimed on, this can be done in one of two ways. You can do it by using kilometer rates, or claiming a percentage of the total running costs and depreciation.

If you want to deal with independent property management specialists who’s sole focus is the upmost care of your property whilst obtaining the highest yield possible on your investments then call Quinovic Mt Eden today.