As the owner of a rental property you are able to claim a surprising number of expenses as tax deductions to offset the rental income. As long as you keep the receipts for each item of expenditure, the process is easy. Some tax deductible expenses include:
• Advertising for a tenant
• Body Corporate fees
• Council rates
• Depreciation on plant and equipment
• Interest on a loan to purchase the property
• Land tax
• Property agents’ fees
• Repairs and maintenance (fully deductible)
• Capital works deductions/special building write-off
• Stationery, postage and telephone
• Travel expenses
• Water rates
Is your property new or near-new? If so, this means extra tax deductions. New, near new and refurbished properties usually have large claims for depreciation on fixtures and fittings. Make sure you keep records of all refurbishment costs. Nearly all properties will have some depreciation claims at least for original building costs. If you don’t have details of the original cost of building works you may need a quantity surveyor to provide you with a tax depreciation schedule. Be sure to ask your accountant about the specifics of deductions on your new property.
Are your property costs higher than your property income? The ATO allows you to offset an income loss against any other income and leads to a reduction in taxable income known as ‘negative gearing’. Many investors have found it is a lucrative way to build returns through high capital growth.
Calculation of all your tax deductible expenses is very specialised and should always be carried out by a qualified accountant to ensure that you are claiming the maximum amount of deductions you are entitled to. But with a bit of forward planning (and maybe a quiet afternoon in the home office!), if you can get all your records in order now not only will you be guaranteed a headache-free end of financial year, but a great return.
Information supplied by Neil Crawford of Heffernan Crawford Certified Practicing Accountants