According to recent ATO research, property investors collectively paid around $1.3 billion less in tax than they were supposed to in the 2019-20 financial year... This figure highlights the importance of ensuring that tax obligations are met in full, and underscores the need for investors to seek professional advice to ensure compliance with tax laws and regulations!
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.
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?
What can't you claim?
- 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.
New weapon aimed at catching investors out
- 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.
According to our good friends at REIWA, the ATO has a new weapon in its arsenal – a data matching softwear! This allows them to obtain data relating to residential investment property loans from authorised financial institutions for the period 2021-22 through to 2025-27.
This data includes:
client identification details (names, addresses, phone numbers, dates of birth, etc)
It will then be matched against ATO records.
This is just one example of how the ATO is clamping down on property investors. There's never been a more important time to be honest and thorough so stay safe and check out the ATO's TOP TIPS for preparing a tax return this year!