Australians earned more than $33.5 billion in rental income on investment properties and claimed more than $41.5 billion in tax deductions against those properties in the 2011-12 tax year, according to the latest Australian Taxation Office figures.

The total of $8 billion in net losses claimed in the 2011-12 financial year was a slight increase on the $7.9 billion claimed in 2010-11, ATO figures taken from rental property schedules show.

Investment property owners in NSW earned the largest total rental income, bringing in almost $11.6 billion in rent combined, followed by investors in Queensland property, who earned more than $7.9 billion in total rent.

After deductions, however, NSW investors claimed an average loss of just $1,484 on average, while Queensland investors claimed average investment losses of $4,860.

The data is based on rental property schedules so it does not reflect the total number of properties or individuals with a rental property as the same property can have more than one owners and an individual can own more than one rental property.

Interest on loans accounted for the biggest value of deductions by far, with a total of over $24.1 billion in interest expenses claimed in the 2011-12 tax year. That was up from $22.3 billion in the previous tax year.

Council rates were the next biggest ticket item for deductions, although the total claimed in 2011-12 was only $2.36 billion.

Capital works deductions, repairs and maintenance, plant depreciation, and property agent fees and commissions were other major categories of tax deduction.

The figures have fuelled further debate about the costs of negative gearing and the merits of allowing investors to claim sizeable deductions against their rental properties.

The National Commission of Audit report, released last week, did not recommend negative gearing be removed and the government is not expected to tamper with negative gearing in next week’s Federal Budget.

However, Federal Treasurer Joe Hockey has previously indicated that negative gearing would be addressed in a white paper on taxation, which would also consider changes to income tax and the GST.

Zoe Fielding – The Property Observer