EOFY – time to think about tax
Get your paperwork in order to make the most of your deductions (while you can!)
With the new financial year comes changes to some property investor tax deductions, making FY17 the last opportunity to make the most of some tax breaks. Landlords should keep this in mind as they gather their paperwork in preparation to lodge their tax returns.
In FY14, 2.03 million individual investors claimed $42.5 billion in deductions relating to their rental properties. Whether you use a professional for your tax affairs or DIY, it’s a good idea to check just what you can and can’t claim before submitting your return for the year.
The ATO website has information for property investors that sets out what income must be declared and what expenses may be deductible. There are some expenses that may be deductible immediately (management, maintenance and interest costs), while others need to be deducted over several years (borrowing, depreciation and capital works costs).
These costs may be immediately deductible:
- advertising for tenants
- body corporate fees and charges
- council rates
- water charges
- land tax
- gardening and lawn mowing
- pest control
- insurance (building, contents, public liability) – don’t forget that your landlord insurance is deductible
- interest expenses
- property agent’s fees and commission
- repairs and maintenance
- some legal expenses
- travel undertaken to inspect the property, to collect the rent or for maintenance – FY17 is the last year that these costs can be claimed.
Consult a tax accountant about other expenses you may be entitled to claim.
In addition, these expenses may be deductible over several years:
- borrowing expenses (not including interest, which can be deducted immediately)
- depreciation (decline in value of depreciating assets such as carpet, furniture and appliances) – FY17 will be the last year to claim depreciation on any plant and equipment you did not pay for yourself (i.e. bought by a previous owner or installed by a builder if a new build)
- capital works expenditure.
Landlords with short-term rentals (including those who rent out all or part of their own homes, such as on Airbnb) should also check what can and cannot be legitimately claimed as a deduction and what income they must declare.
For all our PMs and real estate industry readers, the ATO has information about what you can and can’t claim too. And from an insurance perspective, there are some covers you may be able to deduct including income protection (although not cover purchased through super) and professional indemnity.