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Tax time tips for property investors

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The end of the financial year is a busy time for everyone, especially when it comes to determining your investment property tax deductions. Between what you are and aren’t obligated to receive and preparing your claim, here, we break down our top tax time tips for property investors.

What tax can I claim?

If you’ve invested in a rental property, you may be able to claim certain expenses as deductions, according to the Australian Taxation Office. To do so, however, you’ll need to have kept thorough records of your expenses, as well as listing all of your rental income in your annual tax return.

Immediate rental deductions

As a landlord, you are legally obligated to maintain the property to a high standard of care for your tenants. This upkeep normally comes at an expense, though you may be entitled to claim deductions for the following:

  • Gardening services.
  • House and contents insurance.
  • Cleaning and repairs.
  • Controlling pests.

This includes any advertising you made to find your tenants, and any council rates including water and land tax. Furthermore, you may be able to claim interest from a loan used to purchase an investment property or finance repairs.

For those who lease out their rental properties to tenants, you can claim deductions for the time in which the home was occupied. This includes time-shares; however, you can only claim deductions for periods where it was rented to outside parties, not for personal use by you or your family.

It’s important to note whether your property is positively or negatively geared. If you make a profit from your investment property, it’s considered positively geared. However, the ATO advises that if your deductible expenses are more than the income you’ve earned from the property, you might be able to claim immediate deductions against the rental and any other income as part of your tax return.

Depreciating assets

The nature of assets is that their value generally decreases over time. Assets that have a shorter life span is known as a depreciating asset. You may be able to claim deductions for such assets in your rental property, such as ovens and dishwashers – this is known as plant and equipment.

You’ll need to hire a surveyor to assess the deprecation of the house itself (capital works), which is measured from when it is first used by your tenants, and doesn’t include any time it’s used for personal use, such as if you stay in the property for a period of time. Assets must be new at the time of use – you can’t claim for second hand goods.

Borrowing expenses

If you required a loan to buy your investment property and spent over AU $100, deductions are spread over a five year period or the loan term – whichever is the lesser amount of time. Borrowing expenses include:

  • Lender’s mortgage insurance.
  • Mortgage broker fees.
  • Loan establishing fees.
  • Valuation fees.

If you have sold an investment property, and it sells for more than you bought it for, you’ll need to pay a Capital Gains Tax.

How do I prepare my claim?

In preparing your claim, it’s vital to include all income pertaining to rentals, including holiday homes and bond payments. These expenses have to be correct, so make sure you don’t include any time periods where the property was unoccupied or you used it yourself.

When it comes to finding the perfect investment property, Nelson Alexander are the experts. With a long-standing history of property services in the Melbourne area, our team are dedicated to helping you choose the property best suited to your investment dreams, and offer property management services to assist with tenancy needs. For more information, get in touch with our team.

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