Tax time tips for property investors

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It’s the new financial year and there’s no better time to make sure you have your tax affairs in order. Keeping detailed records and accounts and understanding what you can and can’t claim for will save time, effort, money and a potential tax audit.
According to Executive General Manager, RentCover, Sharon Fox-Slater, it’s more important than ever as the Australian Taxation Office (ATO) announced an increased focus on property investors this year.
“If you are one of the 1.8 million people in Australia who currently own an investment property, then you need to make sure you not only work to maximise your entitlements but make sure everything correct and properly documented,” she said.
The first step is working out what you can claim:
  • You can generally claim an immediate deduction against your current year's income for expenses related to the management and maintenance of the property, including interest on loans.
  • Expenses not paid by you, such as water or electricity charges paid by the tenants, can’t be claimed.
  • If your property is negatively geared, you may be able to deduct the full amount of rental expenses against your rental and other income, such as salary and wages. Other expenses, such as depreciation of assets, capital works expenditure and your borrowing expenses, may be deductable over several years.
  • If you're building a rental property, you may be able to claim deductions for the land while you’re building.
  • If your property is available for rent for part of the year, only part of the property is used to earn rent or you rent the property at non-commercial rates, you need to apportion expenses between deductible and non-deductible. As a general guide, apportion your expenses on a floor-area basis.
  • If you prepay an expense, such as insurance or interest, that covers a period of more than 12 months, you may need to spread your deduction over two or more years.
The very best advice at tax time, according to Ms Fox-Slater, is “if in doubt, find out.”
The tax laws around investment properties are complex and the ATO has a wealth of information on its website to assist investment property owners and explain the rules.
“All RentCover policies include cover for professional fees incurred by you of up to $1,000 a year per property – to a maximum of $4,000 for all properties – in connection with a tax audit or investigation*,” Ms Fox-Slater added.
* Conditions Apply