Write it down or you’ll miss out on a tax claim

PROPERTY investors risk missing out on thousands of dollars of easy money by forgetting to claim some lucrative tax deductions.

With tax time in full swing, the biggest windfalls can come from depreciation deductions and writedowns of investment property building costs, but there are several other commonly-forgotten items.

BMT Tax Depreciation CEO Bradley Beer said more than two-thirds of Australia’s two million-plus real estate investors did not maximise their depreciation deductions.

Carpets and curtains are the obvious ones but there are many more depreciable items in a house, and in many cases the construction cost also can be written down by 2.5 per cent a year. For a $250,000 building, this capital works deduction alone is worth $6250 a year.

Mr Beer said bathroom accessories and kitchen items were commonly overlooked, and could deliver investors an instant tax deduction where the assets cost under $300. He said larger outdoor items also attracted valuable deductions, including artificial grass and solar energy systems.

“The Australian Taxation Office lists thousands of items that qualify for depreciation deductions and it can therefore be difficult for investors to ensure they have included every eligible asset in their claim,” he said.

Beyond depreciation, big deductions for property investors include interest payments, council and water rates, insurance, repairs and maintenance.

Real estate investor, author and university lecturer Peter Koulizos said borrowing expenses – such as loan establishment costs, valuation fees and lenders’ mortgage insurance – could be deducted over five years but often were forgotten.

Stamp duty charged on mortgages is also a deductible borrowing cost, but stamp duty charged on the property purchase is not. The ATO has a free online guide, “Rental Properties 2017”, to help investors navigate deductions.

Mr Koulizos said investors should remember property management expenses.

“They should provide you with monthly statements and should provide you with an end-of-year statement,” he said.

Expenses for landlords’ travel to a rental property are deductible too, but only until the end of the 2016-17 financial year after Federal Budget changes banned them from July 2017 onwards. Mr Koulizos said this rule change was prompted by investors claiming big deductions for interstate travel – often to Queensland – to combine a holiday with checking on their property.

Depreciation also was hit by this year’s Budget, with new investors unable to claim depreciation on items in second-hand properties.

“The good news is that existing investments will be grandfathered, and investors who purchased up until 7.30pm on May 9 will still be able to claim depreciation as normal,” Mr Beer said.