Tax Time Guidance for Property Investors: Maximise Your Returns

As the end of the financial year approaches, it's crucial to ensure that you are well-prepared for tax time, particularly in specialised fields such as Perth property management.

At D Residential Group, we understand the importance of accurate record-keeping and compliance, and we are here to support you every step of the way. To assist you, we've compiled some essential tips and guidelines to help you manage your rental property finances effectively and maximise your investment returns.

What Income Do I Have to Declare?

For property investors, comprehending the different types of income required for tax return declarations is crucial. It's mandatory to report all rental income received from your property, including income from properties overseas. This Includes:

• Renting part or all of your home: Any income received from renting out a room or the entire property must be declared. Even if you’re only renting out part of your home on a temporary basis, this income is taxable.
• Short-term rentals: Income from holiday homes or other short-term rental arrangements must be included in your tax return.
• Non-commercial arrangements: Income from renting to family and friends at below market rates must also be declared, even if you’re not charging the full market rent.

In addition to rental income, you must also report any rental-related income. This includes:

• Rental bond returns: If a tenant defaults on rent or causes damage to your property and you receive part or all of their bond, this amount must be declared as income.
• Insurance payouts: Payments received from your insurance company to compensate for damage to your property are considered income and must be declared.
• Tenant payments for repairs: Any amount a tenant pays to cover the cost of repairs to your property.
• Letting and booking fees: Fees received for letting or booking services, whether through an agent or directly from tenants.

Essential Record-Keeping

Accurate record-keeping is vital for a smooth tax filing process and to ensure you can claim all allowable deductions. Be sure to maintain:

• Loan documents: Keep all paperwork related to any loans taken out to purchase or improve your rental property.
• Receipts for all expenses: This includes costs related to repairs, maintenance, insurance, and depreciating assets. Ensure these receipts are detailed and legible.
• Land tax assessments: Retain copies of any land tax assessments issued by the Western Australia state government.
• Credit card statements: If you use a credit card to pay for rental property expenses, keep the statements as proof of payment.
• Tenant lease agreements: Maintain signed copies of lease agreements for all tenants.
• Bank statements: Keep bank statements showing rental income deposits and any expenses paid directly from your account.
• Rent statements from D Residential Group: If you use our property management services, retain all rent statements we provide. These statements detail the income received and expenses paid on your behalf, ensuring accurate record-keeping for tax purposes.

Note: If a document does not show the payment date, use independent evidence, such as a bank statement, to confirm when the expense was incurred. Keeping digital records can also be highly beneficial. You can open a dedicated folder in your email inbox for electronic receipts or utilise tools like the Australian Tax Office (ATO) app for paper receipts, ensuring nothing is lost or faded over time.

These records must be in English or be readily translatable into English.

Record Retention

You must retain your rental income and expense records for five years from either the 31st of October or the date of lodgement if you file your tax return later. Although you don't have to submit these records with your tax return, it's crucial to keep them on hand in case the ATO asks for them. If you're involved in an ATO dispute concerning your rental property, hold onto the pertinent records until the matter is resolved.

Calculating Net Income or Loss

To accurately determine your net income or loss, utilise the ATO rental property worksheet. This tool ensures precise reporting of your rental income and expenses. Accurately calculating your net income or loss is crucial for tax purposes and for understanding the financial performance of your investment. Here’s how to do it effectively:

• Income: Sum up all the rental income and related income (as detailed above) you received during the financial year.
• Expenses: Total all allowable deductions, including interest on loans, property management fees, maintenance costs, and depreciation on capital works and assets.
• Net Income/Loss: Subtract the total expenses from your total income. If your expenses exceed your income, you have made a rental loss, which can often be carried forward to offset against future rental income.

Common Deductions for Rental Property Owners

To maximise your returns, ensure you are claiming all allowable deductions. Some common deductions include:

• Interest on loans: Any interest charged on loans used to purchase or improve your rental property.
• Depreciation: Deductions for the decline in value of your property’s fixtures, fittings, and capital works.
• Repairs and maintenance: Costs for repairs to the property (not improvements, which are capital expenses).
• Property management fees: Fees paid to a property manager for managing your property.
• Insurance: Premiums paid for landlord insurance or other property-related insurance.
• Utilities and council rates: Any water, electricity, or council rates paid by you as the landlord.

Why Choose D Residential Group?

At D Residential Group, we offer professional property management services across Perth. 

We pride ourselves on our expertise, efficiency, and support in managing your rental property finances. With our comprehensive record-keeping practices, we save you time and reduce stress during tax season. Our streamlined processes and use of digital tools ensure that all your documents are organised and readily accessible. Moreover, our ongoing support covers everything from managing rental income to handling expenses and disputes, safeguarding your investment. 

Let us help you navigate tax time with ease and confidence. Reach out to us today to learn more about how we can assist you in managing your rental properties effectively. D Residential is willing and ready to help!

Contact Diana Patrascu to get started.