Top tips to help property investors prepare for tax time

Gather up your paperwork everyone, it’s every accountant’s favourite time of year – tax time! It can be a headache for those of us not quite as well-versed in all things tax but it’s vital to have all your details correct as mistakes can be very costly for property investors.

Ideally, find a tax agent who will go through everything with a fine-tooth comb to ensure you achieve the best outcomes. With 15 years of industry experience, we have gone through the process many times and have come up with a list of the key aspects to be aware of as you prepare for your tax return.

Be aware of deductions you can and can’t claim
This is the best bit – discovering all the deductions you are entitled to as an investor that will lower your taxable income. At this point, you need to gather all receipts of expenses you’ve had throughout the year. You can find out the nitty gritty at the Australian Taxation Office (ATO) website, but item that aren’t always obvious for claiming include advertising, interest from mortgage, mortgage fees, council rates, maintenance costs, accountant’s fees, insurances, and property management fees.

Depreciation

Unlike the above-mentioned deductions, depreciation is a different beast as it’s not based on any expenditure, but depreciation can greatly impact your tax return depending on when your property was built. You can’t claim on properties built before 16 September 1987 but beyond that date, you can claim depreciation costs of 2.5% per year for 40 years. It can be a complicated claim, so we recommend looking into a quantity surveyor who will provide you with a formal tax depreciation schedule and well worth looking into.

Income goes beyond rent
This is the not-so-best bit where you might be up for paying tax. Of course, any rent you received must be added to your income tally, but don’t forget other investment dollars such as rental bond returns, insurance payouts (including for lost rent), booking fees or any property sales.

Don’t rule out last year’s claims
You have two years to adjust your claims with the ATO for small to medium businesses, which included property investments. So, if you’ve forgotten to include depreciation in the years you’ve owned a property, you can at least amend the past two years.

There’s a lot that goes into a good tax preparation, so start collecting your paperwork early so by 31 October you have done all the work required! If you need recommendations of good tax agents or quantity surveyors for your property, call our director Diana Patrascu on 0402 888 550.