Understanding Tax Deductibility and Buyer’s Agent Fees
For most people who are buying a home to live in, buyer’s agent fees are not tax-deductible.
This is because the property is not being used to generate income. Only expenses related to generating assessable income, such as rental income from investment properties, are eligible for tax deductions.
However, the situation is different if you are purchasing an investment property.
While buyer’s agent’s fees are not immediately deductible as an expense in the year you purchase the property, they can be added to the property’s cost base.
This means that buyer’s agent’s fees and other acquisition costs like stamp duty and the property purchase price can reduce your capital gains tax liability when you sell the property in the future.
Keeping accurate records is essential.
Good record keeping of all property-related expenses—including buyer’s agent’s fees, stamp duty, and the property purchase price—will help you substantiate your claims for deductions or cost base adjustments when it comes time to sell or during tax time.
It’s always wise to consult a tax professional before making any decisions.
A professional can help you claim tax deductions, ensure you maximise your tax benefits and assist in developing an overall tax strategy for your property investments.
Are Buyer’s Agent Fees Tax-Deductible?
You cannot claim your buyer’s advocate fees as a tax deduction if you are making a personal home purchase, that is, purchasing a home to live in.
Buyer’s agent fees for personal home purchases are not tax-deductible because these properties do not generate rental income.
If you’re purchasing an investment property, future tax deductions are possible. Buyer’s agent’s fees are only deductible when the property is intended to generate rental income.
You can start by looking at tax benefits and creating a property investment strategy with your buyer’s advocate.
Investment Property Benefits and Tax Implications
Can I claim my Buyer’s Agent fees as a tax deduction for an investment property?
When buying your investment property, you may use an investment property buyers agent to help you make a successful purchase.
Their total fee cannot be claimed immediately as a tax deduction in the year you purchase the property.
However, the buyer’s agent’s fees are included in your investment property cost base when calculating your gains and losses. Including buyer’s agent’s fees in the cost base can help reduce taxable capital gains when the property is sold.
When it comes time to calculate all expenses generated, include the buyer’s agent’s fees. Documentation, such as the property’s sale contract, should be retained for record-keeping and substantiating claims.
How buyer’s agent fees affect capital gains tax
Buyer’s agents play a key role in helping investors understand the long-term tax implications of their fees, especially when it comes to capital gains tax. You should seek advice from a professional to assess any tax benefits you can receive.
Maximising Tax Deductions for Your Property
Claiming interest payments on mortgages
Your property must be used to generate income to claim interest payments on your mortgage at tax time.
An example of this is rental income.
If you are renting out your property, you can claim the interest portion of your repayments as a valid tax deduction.
Interest on loans for investment properties is fully deductible if the property generates rental income.
This provides immediate tax relief by reducing your taxable income in the year the expense is incurred. Claiming interest payments on investment property loans also offers ongoing tax relief for property investors.
Claiming maintenance work on your property
Your investment property may require occasional or ongoing maintenance work. Your property manager can connect with your tenants to organise when this is required.
The cost of maintenance work (e.g., cleaning or regular gardening) can be claimed as a tax deduction. Maintenance and repair costs for rental properties are fully deducted from the year you incur them.
Claiming asset depreciation on household appliances and fixtures
Household appliances and fixtures are considered depreciating assets in an investment property.
This expense generated can be claimed as a tax deduction.
If you want to claim these, you need to have a depreciation schedule — this is a report on the tax depreciation deductions you can claim on your investment property.
Depreciation on household appliances and fixtures in investment properties can be claimed as a tax deduction and provides long-term benefits.
Including appliances and fixtures in your depreciation schedule can increase tax deductions over time.
The Role of Buyer’s Agent Fees in Property Investment
How buyer’s agent fees can benefit your property investment
A buyer’s agent is your trusted expert who assists with your investment property purchase.
Their access to off-market properties and insider knowledge of the property market can prove invaluable when finding the right investment for your financial goals.
Their expert knowledge helps determine how much value a property can give you. The property purchase price and buyer’s agent fees form part of the cost base for future capital gains calculations. They can also prevent you from purchasing a problem property that incurs costs and results in capital loss.
A buyer’s advocate helps you through the entire process — from the property’s sale contract to connecting you with a reputable property manager.
At Raveche Property, our expertise is always on your side to ensure you invest in a property with strong capital growth.
Related: What is A Buyers Agent?
Long-term benefits of buyer’s agent fees for investment properties
You can’t make an immediate claim on your buyers agent fees — but start looking long-term.
When it’s time to sell your investment property, your buyers agents fees will be considered a capital expense. This means you’ll pay less tax on the profits you make from selling your property.
Not only can the buyers agent assist you in purchasing a worthy investment, but their fee can generate significant savings when you’re ready to sell.
Understanding buyers agent fee tax implications is important for long-term tax planning, as these fees may affect your property’s cost base and future capital gains tax.
Although it is never the desired outcome, your investment property can sell for less than your purchasing price.
If so, your buyer’s agent fees will be added to the capital loss. You can then use this to offset any future capital gains you generate, which means more savings!
Conclusion
When considering are buyers agents fees tax deductible, remember their fee is not deductible at purchase time. Consolidate your capital expenses to save money when it’s time to sell. Ensure you are making valid tax deductions by consulting with a professional.
Frequently Asked Questions
Can you claim a buyer's agent fee on tax?
Using a buyer’s agent when purchasing an investment property can reduce your tax when it’s time to sell it. This is because the buyer’s agent fee is part of the cost base of purchasing the investment property, so they reduce capital gains tax when it’s time to sell the property. You should always seek professional advice and ensure you have the most up-to-date information from the ATO.
Are agent selling fees tax-deductible?
If you are selling an investment property, you can claim expenses such as depreciation, property management fees and agent fees you incur.
Can you claim tax agent fees on tax?
According to the ATO, any fees you pay to a recognised tax adviser are deductible in the year you incurred them.
Is a buyer's advocate tax-deductible?
If your property will be owner-occupied, buyer’s advocate fees are not tax deductible. However, a buyer’s advocate can save you on potential additional costs from purchasing a property in poor condition — a scenario they will help you avoid.
You should always seek advice from a qualified tax professional to make informed decisions and to ensure your buyer’s agent fees are tax deductible.
