‘Can I claim tax deductions on my investment property if I have other income?’

Q) I earned a taxable income of about $1,000 this financial year. I have an investment property and I am wondering if can I still claim the usual tax deductions for bank interest, insurance rates etc with regard to this property to reduce my income tax, or will I end up with a huge tax bill? 

I will assume that the “taxable income” you referred to, might be the income from employment. We call this income part of your tax assessable income. To that, we would add the gross rental income from your investment property and any other income from other sources to give us your total assessable income.

From that total, you can continue to claim all the expenses associated with the investment property, including maintenance, interest, local government charges, real estate agent fees, gardening expenses and most other costs associated with owning the property. All of these expenses we refer to as  tax deductions, which serve to reduce your assessable income. That then leaves us with a figure called your taxable income. Taxable income is used to calculate how much tax you might pay according to the tax tables, which impose a higher rate of tax, the higher your income is.

To complicate matters further, the amount of tax you are required to pay can be reduced through special tax credits called offsets. Offsets are targeted at lower income earners and their effect phases out as your income increases. The common ones are: the Low Income Tax Offset (LITO), the Low and Middle Income Tax Offset (LMITO) and the Senior Australians and Pensioners Tax Offset (SAPTO).

For seniors over age pension age, all of these offsets combine to mean that if you are a single and your taxable income comes in at less than $33,898, you pay no tax and no Medicare levy. For a couple, the threshold is $30,592 each — giving us a combined total of $61,184.

It is possible that all of the expenses are actually greater than the grand total of your assessable income. In this case, that income loss guarantees that you pay no tax but you are not entitled to any special payments or concessions.

If you’re under pension age (66) then the SAPTO does not apply. That will mean that only the LITO and LMITO are used and the highest level of taxable income you can earn before paying tax is $23,226.

For more on investment properties, click here. To read more finance articles by Nick Bruining, click here.

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.