Is a building & pest inspection tax deductible?

The simple answer is NO – not in the way you’re expecting. inspection house report pest check building property

When buying an income producing investment property, the expenses associated with it’s purchase are treated differently to later repair, maintenance and ongoing management costs.

Many of the upfront costs are considered what we call a ‘capital cost’.

These include stamp duty, conveyancing costs and building and pest inpections.

You cannot claim these costs as a tax deduction in the year they were incurred.

Instead they get added to your cost base and essentially reduce your Capital Gain when (and if) you sell the property.

What if I don’t buy the property?

If you pay for a building & pest inspection on a potential purchase that does not proceed then there is no cost base to add it to which means this expense it is not claimable.

What if I run a property investment business?

Now this is a little different  – but it really depends on what you mean by a “property investment business.”

If you’re in the business of  purchasing long-term  investment properties then the conditions described above relate to you.

On the other hand if you are a property developer  who sells stock at the end of the project, or somebody in the business of buying, selling and trading properties then should be able to claim the upfront costs  of running your business, rather making them capital costs.

There also will be many other tax reductions you can claim.

However you will lose the 50% discount on the Capital Gains Tax when you sell a property, even if you hold it longer than 12 months.

Want more of this type of information?

Leon Jacques


Leon Jacques brings over 25 years of business and Real Estate experience to the Property Strategist role at Metropole Sydney. He is a Licensed Real Estate Agent and a previous principal of a major eastern suburbs agency. Visit

'Is a building & pest inspection tax deductible?' have 4 comments

  1. August 6, 2015 @ 4:18 pm Sam

    Is the 0.25% cooling off penalty on termination of a contract to buy a residential investment property an income tax deduction, a capital loss or neither?


    • August 6, 2015 @ 5:09 pm Michael Yardney

      I’m not an accountant but I’d say it’s a capital loss


  2. July 22, 2016 @ 7:48 pm Konash

    I would like to know building inspection done prior to purchase of the investment property is it part of purchase cost as Stampduty and solicitor Charges .

    How we treate the expenses incurred on preparing the Tax Depreciation schedule for investment property ? Is it part of the cost of the property.


    • July 22, 2016 @ 11:03 pm Michael Yardney

      A building and pest inspection is a capital cost, just like legal costs and is not deductible or depreciable


Would you like to share your thoughts?

Your email address will not be published.



Michael's Daily Insights

Join Michael Yardney's inner circle of daily subscribers.

NOTE: this daily service is a different subscription to our weekly newsletter so...