If you own rental properties in New Zealand you need to know what you can and can’t claim.
Expenses you can claim
- rates and insurance.
- interest paid on money borrowed to finance your property.
- agent’s fees and commission – relating to the rental of the property .
- repairs and maintenance (unless they substantially improve the property).
- reasonable motor vehicle and travel expenses
- legal fees for arranging the mortgage or finance to buy the property (see also special note about legal fees).
- mortgage repayment insurance.
- accounting fees for the preparation of accounts.
- depreciation on any chattels provided with a property.
Expenses you can’t claim
Capital or private expenses can’t be deducted from your rental income. Costs you incur to buy or increase the value of a capital asset are capital expenses. Expenses unconnected with producing taxable income are private expenses.
Specifically, these expenses are non-deductible:
- the purchase price of a property.
- the repayment portion of any mortgage instalment.
- interest on money which you borrow for a purpose other than financing the rental property, even if you use the rental property to secure such a loan.
- the cost of additions to the property, and any work that go beyond repair or replacement – these are considered improvements.
- real estate agent’s fees incurred as part of buying or selling the property.
- depreciation on buildings (but ancillary services forming part of a building may be qualify – see special note).
From the 2009-10 income year legal fees for buying or selling a rental property can be deducted up to a limit of $10,000. Before that year legal fees for buying or selling a property were not deductible.
From the 2012-13 income year depreciation on buildings is not deductible. However, if the cost of certain services (examples: a service lift, or ducted air conditioning) can be identified, depreciation on those services is allowable.