Thursday, May 1, 2014

How landlords lost nearly $1.2billion in a single year

The Australian Taxation Office has just released its tax statistics for the 2011-12 financial year. The headline figure is that the 806,890 taxpayers who declared income from a rental property in New South Wales accrued a collective loss of almost $1.198billion.

That's an average loss, across the year, of almost $1500 for each landlord. Now, we have to take that number with a bit of a grain of salt, because some landlords will have an interest in more than one property, and some landlords will have only a partial interest, perhaps sharing their property with a partner, sibling or friend. But an average loss of $1500 per landlord is not insignificant. After all, it's the cost of a modest kitchen upgrade, or perhaps some much needed structural work, or new guttering and drains. Even spread out over two or three properties, that kind of money should be making quite a difference to tenants' comfort and amenity. We shouldn't get our noses out of joint about these losses, should we? Surely we should be saying 'thank you, dear landlord, for all the money you spend!'

Well, let's not get carried away...

The tax stats include a handy breakdown of rental property expenses claimed over the year. So - for your quick reference, here are the top five costs of being a landlord in New South Wales:

1. Interest on loans: a deduction claimed by about 73% of NSW's landlords, at a cost of just over $7.29billion.

2. Body Corporate fees: claimed by almost 40% of NSW's landlords. This comes in a very distant second, at around $718million.

3. Council rates: claimed by nearly 94% NSW's landlords, at a collective cost of $673million.

4. Repairs and maintenance: claimed by 74% of NSW's landlords, at a little under $647million.

5. Property agent fees/commissions: claimed by nearly 72% of NSW's landlords, at a cost of $623million.

Clearly, it costs a lot of money to be a landlord in New South Wales.

But, because they can offset rental losses against their own taxable incomes, while holding out for capital gains, we expect they're not too worried...

Not as long as they've got a tenant, that is.

Tenants were very good to their landlords in 2011-12, generating about $11.5billion in rental income. Without this rental income, landlords would have sunk.

It's a shame more of that rent wasn't put back into the properties we've been paying the mortgage on.

And, with an estimated 92% of landlords' borrowed money going towards the purchase of established dwellings, rather than new construction, those rent funded mortgages aren't contributing to a whole lot of new supply, either.

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