After 3 months and one quarantine, would you believe we're at tax time?! Of course, you'd be more than forgiven for letting it slip your mind in this wild 2020, but being organised and knowing what you are entitled to will mean a better and more accurate tax return!
As a property investor, its pays to ensure you claim the tax deductions you are entitled to. We recommend having a qualified professional draw up a depreciation schedule, which will help outline how much your eligible to claim in depreciation at tax time. Also, it’s important to remember to keep records of all receipts and bank statements related to your investment property and have these on hand to pass onto your Certified Practicing Accountant at tax time.
You may be thinking that these services all add up, but in reality, the deductions you can get in the end makes the initial outlay worthwhile, and the service itself is tax-deductible.
Understanding what you can and cannot claim is half the battle and it’s always best to discuss possible tax deductions with your accountant or tax agent. Be sure to get the advice from accredited professionals, as they can look at your individual financial situation, pick out deductions that you may not have even been aware of, and ensure you do not make an error that could land you in hot water.
Under Australian Tax Law, for an expense to be eligible, there must be a relevant connection between your rental income and rental deductions. You can claim back an expense that you incur from owning a rental property.
So, what you can claim on tax?
- Interest incurred on your loan;
- Property management fees;
- Council and water rates;
- Home maintenance and repairs expenditure;
- Some costs associated with the tenant, like advertising costs;
- Accountant, tax agent or business-related lawyer fees;
- Depreciation on whitegoods and other durables, such as the air conditioner.
What can't you claim?
Follow the rules and declare
- Expenses associated with your personal use of the property;
- Travel expenses to inspect the property - this used to be a claimable up until 2018, so don't get caught out!
- Costs relating to the purchase or sale of the investment property (although these costs may be eligible to be included in the cost base, with sufficient records);
- Utility bills the tenant has paid; and
- Borrowing costs.
Thinking you can get away with making false claims or not declaring income and capital gains is a huge no-no. It’s not a matter of ‘if’ you’ll be caught, but ‘when’, so if there’s one piece of advice you take with you from this article, it is to stick to the rules!
Of course, our experts at Peard Finance and Peard Financial Planning
are always here to help!