It's that time again - the tax man is coming!

05 Jun 2024

Landlords and investors across Australia are preparing to tackle one of the most crucial aspects of property ownership: TAX TIME!

Understanding the nuances of Australian tax laws and capitalising on available deductions can significantly impact your investment returns. Whether you're a seasoned landlord or new to property investment, here's are some tips to help you navigate tax time and optimise your returns.


Tax deductions
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.

Understand tax deductions
The Australian taxation system offers various deductions that landlords can claim to reduce their taxable income. These deductions may include:

- Mortgage interest

- Property management fees

- Insurance premiums (e.g. building, contents and public liability)

- Repairs and maintenance (e.g.  cleaning, gardening, pest control)

- Depreciation

- Land tax

- Council rates

- Travel expenses related to property management

Familiarise yourself with the specific deductions applicable to rental properties in Australia and leverage them to minimise your tax liability.

Land Tax
If you’re a keen investor or own multiple properties, just the term ‘land tax’ can be enough to send shivers down your spine! So, what is it? Land tax is calculated depending on the unimproved value of the land that you own, excluding your primary residence, on June 30.

When it comes to land tax, it’s important to keep in mind that whether or not you “own” the property is based on the date specified in the contract, not the settlement date.
If you’ve recently bought or are planning to buy a property, keep in mind that if you are yet to sell your existing primary residence then you will be required to pay land tax on your new property come June 30. This isn’t ideal, not to mention if your new property is an upgrade!

We strongly advise that you plan the buying and selling of property in advance to avoid this cost shock at tax time.

Capital allowances and depreciation

Capital allowances and depreciation are valuable tax benefits that allow landlords to claim deductions for the decline in value of their property and assets over time. Depreciation represents how much a property’s value has decreased due to age, and includes both the structure and the fittings and loose assets. Understanding the depreciation schedules and eligibility criteria outlined by the Australian Taxation Office (ATO) can help you maximise your tax savings and improve your cash flow.

Keep track of capital improvements 
While routine repairs and maintenance are deductible expenses, capital improvements that enhance the value or functionality of your property must be depreciated over time. Keep detailed records of all capital improvements including renovations, upgrades, and structural changes, as these expenses can be claimed as deductions over their respective depreciation periods.

Follow the rules and declare
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 are always here to help!

The information contained herein is for informational purposes only and should not be solely relied upon as financial advice. Please contact Peard Finance for an individual assessment of your finances today.

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