Deductible rental costs?

Our Experts Answer:

To be deductible, a cost needs to have a nexus with income so it needs to be necessarily incurred in earning the rent, not be of a capital nature and not be private or domestic. At acquisition, costs can be seen as being related to the acquisition of the capital asset, the property itself. Where this is the case the costs must be capitalised. Generally, legal fees under $10,000 will be deductible and costs associated with gaining finance, such as valuation fees will be deductible. Ironically, if a taxpayer is in the business of property investment and incurs costs in relation to a property they don't end up buying, these costs may be deductible but if the property is actually purchased these same acquisition costs will then generally be required to be capitalised to the acquisition cost.