Tax time is imminent and the reality is that many property investors in Australia are simply not ready.
There are a number of things that a landlord must be aware of so that they don’t come under the heavy scrutiny of the ATO when lodging tax returns and making accurate claims.
You should always seek advice from a tax specialist or accountant to minimise any risk to the legitimacy of your claims and also to maximise your return.
Here are a number of things to think about before you head into tax time.
The net loss generated by negative gearing can be offset against other income to reduce the tax payable. Landlords may be unaware that interest can only be claimed when the property is available for rent. So if your investment property is only rented out for 6 months of the year, you can’t claim the full 12 months interest.
Usually, landlords can claim their landlord insurance premium as a tax deduction. Before tax time, it is well worthwhile that you check your insurance coverage. A standard home and contents insurance policy won’t cover landlords for the specific risks associated with property investing.
If you have not already done so, engage a quantity surveyor to assess your property for depreciation. A thorough assessment of your property features and appliances will give you more tax benefits from your depreciation over the next 30 years.
Apartment or unit owners may be able to claim body corporate fees on or community title properties. Landlords who let a fully-furnished property, such as a holiday home, may be eligible to claim some of their rental income as a tax deduction.
Other expenses such as council rates, land taxes, water and sewerage charges might also be legitimate and claimable expenses.
If you’re a self-managed landlord, you may be able to claim some of the costs of your home office.
If you engage the services of a property manager, their costs can be a deductible expense for landlords. They can also help reduce the burden at tax time by supporting relevant paperwork relating to your property.