The end of the financial year is fast approaching. And for property investors, this means getting organised: assessing your investment performance and preparing your receipts for the lodgement of your tax return.
Whether you own one rental property or several, the key to a smooth EOYF is organisation. No property investor wants to pay their tax accountant to sift through a shoebox full of receipts.
Get organised, and give your accountant a well prepared financial record and summary of any expenses. If you misplace a receipt or invoice, the ATO allows you to substantiate your claims with a bank statement. This preparation will cut down on their time and also your bill.
But before property investors prepare their records and get their receipts in order, they first need to know what they can claim as an expense.
It is essential that you keep on top of your investment property tax deductions and claiming what you are entitled to – this not only keeps you out of trouble with the ATO, but it also enables you to increase your tax refund and earn more rental income.
Know what you can claim as an expense:
- Rates – water and council rates, charged once the property is ready to rent.
- Interest – make sure you only claim interest on funds that relate to your investment property, not your owner-occupied property.
- Insurance – landlord, building, contents and public liability
- Property management fees – either fees or commissions paid to property agents.
- Depreciation – based on either a depreciation report (quantity surveyors report) or from individual assets purchased for the property (new oven, flooring, blinds etc.).
- Capital works – anything that increases the value of your investment property.
- Ongoing expenses – knowing if work done to your property is maintenance, a repair or an improvement.
Opt to have your property manager pay expenses on your behalf. This will lessen your administration time and allow you to be more organised.
At the EOFY, your property manager will then provide you with a breakdown of all income and expenditure on your rental property.
This is particularly handy if you own several properties: knowing what expenses relate to which property can become confusing as your portfolio grows.
To ensure you claim the expenses you are entitled to on your next tax return, speak with the team at Accounting Evolution. We can get you up to speed on the laws and regulations around investment property tax deductions, and are best placed to advise what you can and can’t claim.
Accounting Evolution is a modern accounting practice with offices in Sydney, Adelaide, and the Sunshine Coast. We work closely with our clients to help them achieve solid profitability and long-term growth. As a Certified Xero Gold Partner, we are at the forefront of technological advancements in our industry, particularly in cloud-based software solutions. Our specialised services include business advice, tax compliance and exceptional SMSF administration.