If you own an investment property, there is lots to consider when it comes to the end of the financial year to ensure that your tax return is compliant with the Australian Tax Office (ATO) but also maximises the return you get from your property.
Having announced that rental property deductions are a key focus area this tax time, the ATO will be scrutinising the tax returns of property investors more so than ever, so it's important to check you're doing everything right.
According to a review of income tax returns conducted by the ATO, 9 in 10 rental property owners are getting their returns wrong, and often see rental income being left out, or mistakes being made with property-related deductions – like over-claiming expenses or claiming for improvements to private properties.
The ATO is particularly focused on interest expenses and ensuring rental property owners understand how to correctly apportion loan interest expenses where part of the loan was used for private purposes (or the loan was re-financed with some private purpose).
If you’re a property investor, we want to help you get everything right on your tax return this year.
Here is a handy list of tips from the ATO regarding the expenses you can claim on your investment.
Expenses you can claim immediately:
- advertising for tenants
- body corporate fees
- council rates
- water charges
- land tax
- cleaning
- gardening and lawn mowing
- pest control
- insurance (building, contents, public liability, loss of rent)
- interest expenses (Remember, no deductions for principal payments!)
- property agent's fees and commission
- repairs and maintenance
- legal expenses.
Expenses that have to be claimed over several years:
- Borrowing expenses for an investment property loan
- Capital works, such as improvements (e.g., bathroom renovations or a new deck)
- The decline in value of depreciating assets costing more than $300, over their effective useful life as determined by the ATO (e.g., carpet, curtains, a dryer).
- If you own a holiday home and rent it out for only part of the year, you have to apportion your expenses accordingly. There is a special section on the ATO website to help you work this out.
The ATO has sophisticated data matching capabilities which include rental property-related data and has recently implemented a new residential investment property loans data matching program.
Finally, make sure you keep good records, and keep all your receipts for at least five years.
For more information, head to the ATO's website and review the 2023 Rental Properties Guide.
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Disclaimer: The information in this article is intended for general information only. Place Estate Agents is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the website information relates to your unique circumstances.