Useful Tax Tips for Property Investors
It’s during tax time that you should truly appreciate owning an investment property, because it’s at this time that property investors should reap the benefits of their investment. The rewards come in being able to claim back a wide range of entitled deductions.
The key to successful property investment is to be organised; meaning you should know the exact types of claims, and amounts, that you’re legally able to claim. You should also be aware that it’s an option to have the savings reimbursed in your weekly pay, rather than waiting for a lump sum payment. This can be advantageous because it helps with cash flow, and avoids the usual tax-time rush. If you require more information on this option, please contact the Australian Taxation Office.
Explaining ‘Property Depreciation’
Property Depreciation is one of the biggest deductions a property investor can claim. This deduction relates directly to the wear and tear of your investment property that’s claimed against your accessible income over a specific period of time. The two types of allowances permitted for property depreciation are –
- Depreciation on Plant and equipment; and
- Building Allowance.
Regarding property calculation, the property investor should employ the services of a Quantity Surveying company to perform an inspection of the property. The same Quantity Surveying company that does this inspection will also prepare a Depreciation Schedule that should be submitted to the investor’s accountant to enable the computation of tax deductions.
Investors should familiarise themselves with the process of claiming for property depreciation because, in the first year alone, property depreciation can amount to thousands of dollars. Keep in mind, though, that older properties also depreciate.
If your investment property is rented out, there are expenses that you are entitled to claim outright. See our list below for some of the expenses you can legally claim –
- Bank Transaction Fees: Set-up and management fees for bank finance, and any other related accounts;
- Property Advertising Expenses: All advertising expenses incurred by the property owner;
- Corporate Management Fees;
- Property Maintenance Expenses: All expenses applicable for maintenance of the property, including pest control, gardening, pool cleaning, and so on;
- Legal Representation Expenses;
- Insurance Payments: This includes Building Insurance and Public Liability Insurance;
- Real Estate Tax;
- Mortgage Interest;
- Property Management Costs: All expenses incurred for Real Estate Agents’ services;
- Repair Expenses: All expenses for repairs to property within the tax year.
Note: It is advisable to complete property repairs during the year and not when the tax year is near its end. Tradespeople may be in high demand and therefore not available;
- Transportation Costs: This includes costs incurred for any trips made for the purpose of inspection, maintenance, or repair of the investment property.
When in Doubt
If you’re unsure about claiming certain expenses, keep all receipts during the financial year and pass them to your accountant. Remember that receipts should be kept for a minimum of five years. Of course the ATO is ideally your first choice for up-to-date Investment Property Tax information, so don’t forget to always check any details online.