Commercial property investors manage and lease out commercial and industrial real estate (i.e. warehouses, offices, hotels and muti-block apartment towers).
If you’re involved in commercial property investment as an individual stakeholder, or as part of a larger firm or trust, then the EOFY period signals that it’s time to gather up expense records, deductions, and depreciation schedules for all your assets to ensure that you can file your FY24 tax return with minimal stress.
Whether you navigate tax documentation with the support of tax agents, handle the process yourself, or meet somewhere in the middle with a handy tax return preparation checklist or deadline calendar, it’s always useful to get ahead and make sure you know exactly what you can claim back this FY24 tax return time.
In this article, we’re covering the main areas you can claim back at the end of the financial year period. Let’s get right into it below.
General Operating Expenses
Most daily expenses associated with handling a property for commercial rental purposes can be claimed back at the end of the financial year. Repairing and maintaining your property (as long as they are not considered aesthetic or capital improvements) can be claimed, meaning those made after the initial necessary repairs when the property was acquired.
Building, public liability and other relevant insurance, as well as costs for cleaning and security measures are generally also deductible under general operating expenses. Don’t forget to claim back the advertising costs for marketing the property for tenants, whether these are for households and individuals to live in the property, or for smaller offices or workgroups to sublease sections of the building.
Utilities & Leasing
Charges related to utility bills (i.e. water, electricity, gas, internet and any other essential utilities paid by the property owner) can also be claimed back. If you have paid any utility bills as a commercial property owner, then ensure that you keep records of receipts with all your utility providers.
Be sure to also check the local government rates and local levies to see if exceptions apply. For example, if you’re a commercial property owner investing on behalf of a trust or as part of a small business.
Similarly, the legal and professional fees for preparing and renewing leases, tenant contracts and hiring leasing agents will come under general operating expenses.
Interest & Loan Expenses
Loans you take to purchase, build or improve a commercial property can’t be reclaimed on expenses, but the interest you receive on them can. You can also claim back the fees associated with securing these loans.
Some examples of interest, loan, and sale expenses that can be claimed back alongside loan establishment fees includes:
- mortgage insurance,
- mortgage broker fees,
- any legal fees accrued during the purchase of the property,
- application fees and valuation fees associated with getting a loan to pay for the purchase or ongoing tenure of your commercial properties.
Consult a dedicated tax professional for further assistance if you have any interest or loan expenses you may like to claim in your FY24 tax return.
Depreciation
Significant structural improvements and building construction costs are often considered as capital works depreciation. The same goes for deprecation of building equipment and interior assets, like air conditioning units, carpets, furniture and large office fittings.
A quantity surveyor will be able to complete a depreciation assessment and calculation to help you claim the correct amount.
Keep in mind that repairs or major improvements needed to make the property rentable for work or living can be included in the general acquisition costs to be claimed back, for those in demand commercial properties you’ve invested in this financial year.
Professional Fees
There are three main fees associated with property investment that companies and individuals can claim back. The first is property management fees, relating to property management companies and agents for initial inspections and acquisition.
The second is legal expenses and fees paid in conjunction with lease preparation and renewal costs. As these fees are required in the purchase of a property and preparation for placing the property on the rental market, these fees can also typically be claimed back by property investors.
Finally, you can even claim back fees paid for professional accounting services and tax advice. Simply put, if you’ve specifically enlisted aid from tax professionals for the financial management of your commercial properties, you may be eligible to claim back the expenses resulting from these services on your tax return for that respective financial year.
Travel Expenses
For those who have been involved in commercial property investing and management for a while, you’ll probably be aware that the sphere of what constitutes travel expenses for tax purposes has shrunk. But despite these restrictions, you are still able to deduct some travel costs involved in the course of managing, maintaining or inspecting your commercial property.
Careful tracking and recording of your expenses will be essential to prove that this travel was made for the sole purpose of meeting with tenants or real estate agents, property management or conducting due diligence. Check the most up-to-date laws for a full list of the specific conditions where travel expenses can be claimed back.
Claiming Back What You Can: Conclusion
The end of the financial year provides an ideal opportunity for commercial property investors to take stock and record their work expenses to claim back and receive some pretty favourable deductions in the process as well.
With our EOFY tax tips, we’ve covered the areas you can claim back. However, this is by no means an exhaustive list. You should always check with the Australian Taxation Office website and available digital resources alongside seeking independent advice before finalising and filing your FY24 tax return.
Working with a tax agent will also extend your submission deadline to 15th May 2025, however you must have initiated work with them and ensure they are registered with the ATO before 31st October, which is the standard deadline.
