If you own an investment property, now is the time to brush up on your tax knowledge, with the end of financial year only a few weeks away.
Besides the heavily discussed negative gearing aspects of investment properties, there’s a wide range of other legitimate tax deductions you might be able to claim as a result of expenses you’ve outlaid over the last twelve months. There are four broad categories of expenses that can usually be claimed by landlords.
The first and most straightforward, are the immediate expenses most property-owners pay out such as body corporate fees, council rates, land tax, water/sewerage charges and insurance. There are also deductions for capital expenditure you may be able to claim against your rental income.
The second area includes all the costs of actually being a landlord, and cover such items as cleaning, gardening expenses and pest control. In most cases, where you’ve spent money on your investment property, you can also claim for repairs and maintenance such as painting, oiling timber work, replacing damaged fences, broken windows, repairing guttering and fixing plumbing or wiring.
The third type of deductions are for the costs relating to the actual tenanting of your property: starting with the costs of advertising for new tenants, and extending to your leasing agent’s fees (if not deducted automatically from your net payments); travel expenses required to inspect, repair or maintain the property, to collect the rent or to visit your rental manager; associated office expenses and bank fees; and any legal costs you incur in relation to dealing with bad tenants.
The fourth type of deduction is of a more technical nature and deals with financing costs such as borrowing expenses; any decline in value of depreciating assets; or interest on money borrowed in order to invest in or improve a rental property.
Unless you’re absolutely on top of the Australian tax rules, always seek out the assistance of a good accountant or tax specialist who’ll be able to provide the most up-to-date and reliable advice on what and how much you can claim. In addition, the ATO website provides general information on rental property expenses, as well as a series of videos and topic pages outlining some of the trickier tax deductions, including borrowing expenses, capital works, interest expenses, legal expenses, repairs and maintenance, and travel. Even if you have an accountant managing all your tax affairs, it’s worth heading to the ATO’s webpages and familiarising yourself with the rules.
So this financial year, check that you’re claiming every deduction you’re entitled to, and ensure your investment is delivering its best return for you.
The above information is provided as a general guide only and is in no way intended as financial or taxation advice. RT Edgar encourages property investors to seek out the professional advice of a taxation specialist or accountant before making decisions of a financial or legally binding nature.