Are you relatively new to property investment and aren't quite sure of what you can and cannot claim?
If the answer is yes, don't worry – you are not alone.
As a new property investor, it is worth speaking to a professional tax accountant to get a good understanding of what you can and cannot claim. After all, you don't want to miss certain tax deductions simply because you didn't know they were available to you.
Further, with the Australian Taxation Office (ATO) revealing it will speak to more than 350,000 taxpayers this year in a bid to crack down on dubious tax returns, it is now more important than ever to get your tax return just right.
As a property investor, you are eligible for a range of specialised tax breaks - concessions that others may not be entitled to.
Some of the more common expenses that you can claim in relation to your property investment, include:
- Cleaning costs, gardening costs;
- General repairs and maintenance;
- Travel to and from the rental property (within reason);
- Advertising for tenants;
- Real estate management fees;
- Council and water rates;
- Electricity and gas;
- Insurance including building and contents;
- Interest on your investment loan;
- Land tax.
You can also claim the cost of household items that your tenants have access to, including white goods, furniture and air conditioners. Of course, it is important to note that the full cost of each item cannot be claimed as these items are subject to depreciation. In other words, the relevant deductions have to be claimed over a period of years based on the useful life of the item in question.
But while there is clearly a range of expenses that you are able to claim, there is also a plethora of things you either cannot claim or things that cannot be claimed in the traditional sense.
Take for example building and construction expenses. While these are not, traditionally speaking, tax deductible, they can be claimed under the special building write off rule.
Broadly speaking, if the rental property was built after 15 September 1987, you can claim the portion of construction expenses that remained unclaimed at the date you acquired the property.
This cost can be written off at 2.5 per cent each year over 40 years. But you have to know the value of the construction work and when it was carried out. You can ask the previous owner to supply the costs, or engage a suitably qualified expert, such as a quantity surveyor, to provide an estimate. In the case of a new dwelling, the builder or a quantity surveyor should be able to provide you with the relevant cost details.
Other outgoings or expenses that cannot be claimed include any stamp duty paid on the property, the valuer's fees on acquisition, advertising costs on the sale and legal expenses that are generated during the purchase and sale of the property. But while these costs are not tax deductible, they can all form part of the cost base of a property if subsequently sold, for capital gains tax purposes.
With so much to consider, preparing your tax return as a property investor can seem a touch overwhelming. So this tax time, it may just pay to speak with a professional.