The cost of advertising for tenants is tax-deductible, so are letting fees paid to property managers who procure tenants on landlords behalf. Any expense incurred in relation to preparing or varying the lease with your tenant is also tax-deductible, even though such expenditure is usually considered capital in nature.
In contrast, costs incurred to purchase new depreciating assets (such as a dishwasher or clothes dryer) and structural improvements to the building to make the property more attractive to prospective tenants are capital and not tax-deductible, though such costs will be eligible for depreciation and capital works deduction claims. Landlord insurance premiums are also tax-deductible as a general rule, as are legal costs required to evict a tenant.
A deductible cost that is often overlooked is travelling to inspect the property. For properties within the vicinity of the landlord’s home, the landlord may claim motor vehicle deductions on the inspection trips. For properties at longer distances, he may even claim airfares.
Any costs claimed must be wholly attributable to the property inspection. If other purposes exist, such as going on a holiday, then apportionment of the travelling costs to determine the deductible portion will be required. Reasonably strict substantiation rules apply to travelling costs, so make sure you keep all your receipts, invoices, and a travel diary.