As we embark on the beginning of 2014 financial year, it’s time for Australia’s 1.8 million property investors to get their affairs in order. If your rental property requires any repairs or maintenance work, it’s a good time to set up a plan so that you can claim the relevant deductions in this income year.
In order to maximise your deductions, the most important thing you have to do is keep good records. You don’t have to be super organised with this. Over the year, put every receipt into a box and hand it to your accountant after June 30. Pretty simple.
If you’ve lost some receipts, but you paid with a credit card or EFTPOS, the tax office will accept bank statements for individual tax payers as proof of purchase, so make sure you scour them at year’s end for any expenses you don’t have separate receipts for.
Investors really need professional advice to ensure they don’t make mistakes. In 2012, about 110,000 landlords made incorrect claims on their tax returns and the tax office has just sent letters to all of them. The ATO has their eye on property investors following a surge in deductions claims in recent years, as more investors switch to property over shares post-GFC.
Don’t muck around with the ATO. The truth is, our tax system is extremely generous in supporting property investors, so take advantage of this but don’t make bogus claims. Investors doing their own returns are bound to make mistakes – you’ll either claim for things you’re not allowed to or you’ll miss some deductions because you don’t know the ins and outs the way an accountant would.
There are so many small things you can claim for that many investors miss. The ATO has provided a comprehensive list of immediately deductible expenses – here it is.
- Advertising for tenants
- Bank charges
- Normal body corporate fees
- Cleaning costs
- Council rates
- Gardening and lawn mowing
- Insurances – building, contents, public liability
- Interest on loans
- Land tax
- Lease document expenses – preparation, registration, stamp duty
- Some legal expenses
- Pest control
- Property agents’ fees and commissions
- Quantity surveyors’ fees
- Some repairs and maintenance costs
- Bookkeeping fees
- Servicing costs – eg service to a water heater
- Stationery and postage
- Telephone calls
- Tax-related expenses
- Travel and car expenses
- Water charges
There are a few things not widely understood by investors. Here’s a few that stand out:
- Payments you make to body corporate administration funds and general purpose sinking funds are considered payments for the provision of services by the body corporate and you can claim a deduction for these levies at the time you incur them. However, if the body corporate requires you to make payments to a special purpose fund to pay for a particular capital expenditure, these levies are not deductible
- Some legal expenses incurred in producing your rental income are deductible – for example, the cost of evicting a non-paying tenant. Most legal expenses, however, are of a capital nature and therefore not deductible, eg the costs of purchasing or selling your property
- You can claim a deduction for travel expenses, such as travelling to your property to inspect it or make a repair
- You cannot claim the cost of buyers’ agents fees paid to any entity or person you engage to find you a suitable rental property to purchase. However, these costs may form part of the cost base of your property for capital gains purposes
- Only the interest paid on the loan for your investment property is deductible. If you’re paying principal and interest, you cannot claim the principal portion
All the information above is general in nature. Use it as a guide only. As with most tax stuff, it’s best to get professional advice. For more information, download the ATO’s Rental Properties Guide.
Phone: (07) 3263 6085
Fax: (07) 3263 5985
Mob: 0400 833 800
Mob2: 0409 995 578
The information in this message is intended for the recipient named on this email. If you are not that recipient, please do not read, copy, distribute or act upon the message as the information it contains may be privileged and confidential. If you have received this message in error, please notify us immediately by return email. Thank you for your co-operation