As the familiar cycle of the financial year comes full circle, property investors across Australia find themselves once again facing the task of tackling their tax obligations — for property investors, navigating the complexities of taxation is of paramount importance to ensure compliance and optimise financial outcomes.
Your Investment Property reached out to :Different head of customer advocacy Danielle Bunton (pictured), who shared her insights about what investors need to know about the upcoming tax filing season and end of financial year (EOFY).
What deductions can property investors claim?
Ms Bunton said there are a lot of potential areas where property investors and landlords can claim deductions this tax season.
“We always recommend speaking with an accountant or carrying out research to better understand where they can claim returns,” she said.
Here are some of the common deductions property investors can claim:
- Depreciation deductions
Ms Bunton said the tax depreciation schedule is often overlooked by many investors and landlords.
“A tax depreciation schedule is a report that outlines the available tax deductions for removable assets such as plant and equipment, carpets and appliances,” she said.
“Depreciation can be claimed for the wear and tear of any of these items helping to reduce taxable income.”
- Agent fees and commission relating to your property
Landlords can also claim deductions on any agent fees and commission related to the management of their rental property.
This includes fees for services covering finding tenants, advertising, managing the property and handling rental payments.
- Council rates, body corporate fees, and water rates
Investors can claim back council rates, body corporate fees, and water rates that have been acquired as part of the rental property.
For these claims, it is crucial to have all the related receipts and invoices.
- Repairs and maintenance
Ms Bunton said maintenance is a win-win for tenants and landlords alike.
“It pays off in the long run to stay on top of your rental’s maintenance, but many don’t know that you can actually claim back on it too,” she said.
Maintenance fees can include the cost of hiring professionals to carry out repairs, as well as the cost of the actual materials needed for the repairs.
- Interest on investment loans
For many investors who have taken out a loan to purchase the property, there is also a chance to claim back the interest accrued on that loan as a tax deduction.
“In some cases, the whole interest is not able to be claimed, but rather a portion of it. Again, the most important thing to have in these cases are all copies of receipts and invoices,” she said.
What tax considerations should property investors take into account?
It is important for property investors to be aware not only of the tax benefits but also the tax costs associated with owning an investment property.
“If you are an owner of a rental property, you may also be subject to income tax, capital gains tax, and land tax. You may also need to know about general value shifting regime, goods and services tax, negative gearing, and pay as you go (PAYG) instalments,” Ms Bunton said.
“Tax laws can be subject to revisions each year, so it is always important to be up to date with the most current legislation.”
Ms Bunton said each state or territory may also have specific tax rules or concessions that could differ from the previous year.
One of the most recent changes was Victoria’s tax reform that would abolish stamp duty and introduce an annual property tax for commercial and industrial properties.
“Heading into tax time, it is essential to be aware of any regional variations that might affect landlords' tax liabilities,” she said.
What can investors do to be prepared for the tax season?
Preparation is key to a hassle-free tax season. Ms Bunton said investors and landlords must take advantage of the month ahead to speak with their tax accountant to know what they can and cannot claim.
“It’s equally as important to get clarity on what documentation they will require,” she said.
“The more information landlords can provide, the better equipped they will be to get you the maximum refund — not having the correct documentation and not claiming the right expenses can cost property owners hundreds or even thousands of dollars on their returns.”
Ms Bunton said this is why keeping track of your financial records for tax purposes is essential.
“If you don't have evidence to support claims for a deduction, your claims can be disallowed,” she said.
“For rental properties, you must keep rental records for up to five years so it’s important to have them stored or saved safely — you can keep your records in either paper or digital format. It is always advisable to keep a back-up of all your digital records.”
Online tools such as the Australian Taxation Office’s myDeductions tool can also be helpful in keeping track of records.
“We always recommend that landlords speak to a tax accountant or carry out research to better understand their tax returns. If conducting your own research, we’d advise referring to the Australian Taxation Office website, which provides a range of tax fact sheets and toolkits for investors,” Ms Bunton said.
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Photo by Kameleon007 on Canva.
