Rental borrowing expenses

You can visit the ATO Publication Ordering Service to download a copy of the Rental borrowing expensesExternal Link fact sheet.

What are borrowing expenses?

You incur borrowing expenses when you take out a loan to buy a rental property.

They include:

• loan establishment fees
• lender’s mortgage insurance (insurance the lender bills to you)
• stamp duty you pay on the mortgage (not stamp duty to transfer the property into your name – this is used to work out your cost base for capital gains tax purposes)
• title search fees your lender charges
• costs for preparing and filing mortgage documents (including solicitors’ fees)
• mortgage broker fees
• fees for a valuation required for a loan approval.

Amounts that are not borrowing expenses

Borrowing expenses for a rental property don’t include:

• the principal amount you borrow and any repayments
• interest expenses (claim these at interest on loans)
• annual loan package fees (claim these at Sundry expenses)
• insurance policy premiums that provide for your loan to be paid out if you die, become disabled or unemployed (this is a private expense and can't be claimed).

The following expenses are not borrowing expenses, however you can include them in the cost base for capital gains tax (CGT) purposes when you sell or dispose of your rental property:

• stamp duty
  • your state or territory government charges on the transfer (purchase) of the property title
  • you incur to acquire a leasehold interest in a property, such as an Australian Capital Territory 99-year crown lease (if you rent the property, you may be able to claim this as a lease document expense at Sundry expenses)
• legal expenses, including solicitor and conveyancer fees you incur to buy the property.

Claiming borrowing expenses

If your total borrowing expenses are:

• more than $100, spread the deduction over 5 income years or the term of the loan, whichever is shorter
• $100 or less, claim a full deduction in the income year you incur the expenses.

If you got the loan part way through the income year, apportion the deduction for the first year according to the number of days in that year.

If you repay the loan in less than 5 years, you can claim a deduction for the balance of the borrowing expenses in the final year of repayment.

Calculating borrowing expenses

To work out your borrowing expenses, you must apportion any deductions for parts of the loan used for private purposes. For example, private purposes may include to buy a car, pay for school fees, or remodel the kitchen in your home. You can't claim private expenses.

To help work out your claim, use our Deductible borrowing expenses calculator (XLS,154KB)This link will download a file.

This is a general summary only.

For more information:

• see Residential rental properties
• watch our short videos at Rental property video series
• download our Rental properties guide
• read our Capital gains tax guide.