Tax incentives for homeowners in Australia in 2024

Whether you're a homeowner or a property investor, owning real estate can mean tax benefits when your 2024 tax return comes around. Homeowners and investors encounter various expenses, from ongoing maintenance to using spaces like home offices or rented rooms.

Understanding the available tax deductions for these expenses is essential for your tax return this year. Whether you're managing a home office, leasing out a room, or overseeing an entire property, being informed about eligible deductions can significantly ease the burden of tax time. It pays to be across what you can and can't claim come tax time. 

Tax deductions for homeowners

According to the Australian Taxation Office (ATO), homeowners who reside in their properties without generating income are typically ineligible for tax deductions. However, with the widespread adoption of remote work during 2020 and beyond, there may be opportunities for homeowners to qualify for additional tax benefits. Below are some of the tax incentives identified for homeowners: 

The home office
Suppose you designate a room or another area of your place, such as a granny flat, for work or business. In that case, you can claim tax deductions for associated expenses, including interest on your home loan, home insurance, and maintenance costs. The calculation typically considers the floor space of your home office relative to the total property area. 

Chat with your accountant about the exact amount you can deduct. You must also factor in that the portion you claim as a home office could potentially attract Capital Gains Tax (CGT) if you sell the house.

Running costs and depreciating assets
You can claim various running costs associated with a home office, such as utilities, mobile phone, internet, landline, and electricity, particularly those exceeding normal usage.  

You can also claim depreciating assets—office desks and chairs, lighting fixtures, curtains, carpets, heating and cooling systems, computer equipment, etc. However, you can usually only claim the decline in value for items over $300, not the total amount. You must consult with your accountant and the ATO to determine which of these tax benefits you're entitled to. 

Renting out a room
When you're an owner-occupier and rent out a room within your home, you can claim the same tax deductions as a property investor. The ATO treats your room the same way it would an investment property. How much you can claim is calculated based on the rental room's floor space compared to the property's floor space.

You can only claim for the periods when the room is being rented, and when you sell, you could attract CGT for the period the room was rented.

Tax deductions for investment property owners

At the end of the financial year, property investors qualify for several tax deductions if they've earned rental income from the property and only during the rented period. Here is what you can claim as a property investor:

Negative gearing
Negative gearing is a tax strategy in which an investment property owner borrows money to acquire another property. The expenses exceed the income generated from that asset, resulting in a net loss that can be used to offset taxable income. Expenses eligible for negative gearing include mortgage interest, maintenance, agent fees, advertising costs, and asset depreciation. The idea is to take a short-term loss on your investment property in exchange for long-term capital growth and beneficial tax treatment.

Capital works
Property investors could be eligible for tax deductions on capital works conducted before renting the property, including significant renovations or constructions. The deduction rate and duration are influenced by the property's age and the extent of renovations or constructions.

Depreciation
Property owners can claim depreciation on the building's structure and permanent fixtures, such as appliances, carpets, and lighting fixtures. This deduction is particularly significant for newly built properties, where fixtures and fittings have higher initial values and depreciate quickly.

Maintenance and home improvements
An advantage of property investment is the ability to claim expenses for repairs and maintenance, including plumbing, electrical work, and overall property upkeep, like painting and flooring. Expenses for renovations and extensions are typically categorised as capital works, with deductions spread over 25 to 40 years.

As many homeowners strive to save money and maximise their financial security, leveraging tax deductions becomes imperative. By understanding and using available deductions, homeowners can make the most of their properties with tax deductions. You can dive deeper into what tax deductions you're entitled to as an owner-occupier and property investor by speaking with your accountant or jumping over to the ATO website.