Early presents for in­vestors

NT News - Real Estate - - Market Place - AN­THONY KEANE

TIS the sea­son to be smil­ing for many of Aus­tralia’s two mil­lion-plus real es­tate in­vestors.

Christ­mas comes in July (or Au­gust) for prop­erty in­vestors be­cause many have a big tax re­fund head­ing their way soon, or at least some big tax de­duc­tions to off­set their other in­come.

The lat­est Aus­tralian Tax­a­tion Of­fice data shows prop­erty in­vestors claim av­er­age in­ter­est de­duc­tions of $12,800 a year and other rental prop­erty de­duc­tions of about $11,000 a year.

De­duc­tions out­weigh in­vestors’ av­er­age rental in­come of about $19,700 a year, although for many in­vestors with big­ger loans and newer prop­er­ties, the gap is much wider, de­liv­er­ing thou­sands of dol­lars an­nu­ally in neg­a­tive gear­ing tax ben­e­fits.

Prop­erty in­vestors have been stung by the Fed­eral Gov­ern­ment’s re­cent de­ci­sion to ban travel de­duc­tions re­lated to rental prop­er­ties, and to limit de­pre­ci­a­tion de­duc­tions to new items bought by in­vestors.

How­ever, a big­ger fi­nan­cial hit is of­ten self-in­flicted. Ac­count­ing ex­perts say many land­lords fail to make the most of de­duc­tions avail­able to them, so are giv­ing away their money to the ATO.

Whether you’re a cur­rent in­vestor or a would-be in­vestor, it’s wise to un­der­stand the de­duc­tions that can put a smile on your face.


The ATO lets in­vestors claim 2.5 per cent a year of the con­struc­tion cost of rental prop­er­ties built af­ter 1985, but its data shows that fewer than half of all in­vestors claim this. That means they’ve all got very old prop­er­ties, or they for­get a de­duc­tion that can hand them thou­sands with­out drain­ing a cent from their pocket. Ren­o­va­tions such as new kitchens and bath­rooms can be de­ducted this way.


Writ­ing down the value of things such as car­pets and cur­tains has de­liv­ered in­vestors breaks for decades. Now th­ese de­pre­ci­a­tion de­duc­tions are only al­lowed on items or homes bought new by in­vestors, but there’s still a po­ten­tial wind­fall for those who plan.

BMT Tax De­pre­ci­a­tion man­ag­ing di­rec­tor Bradley Beer says its re­search has found that up to three quar­ters of in­vestors don’t max­imise their de­pre­ci­a­tion claims. And many don’t re­alise that they can back­claim for up to two years if they have pre­vi­ously for­got­ten de­pre­ci­a­tion de­duc­tions.


Half a mil­lion real es­tate in­vestors don’t claim in­ter­est de­duc­tions, the ATO data shows. While many own their rental prop­er­ties out­right, oth­ers for­get a po­ten­tially large tax de­duc­tion. How­ever, in­ter­est can only be claimed if the prop­erty is avail­able for rent, so hol­i­day homes for per­sonal use are off lim­its.


While the gov­ern­ment is shut­ting the door on some de­pre­ci­a­tion de­duc­tions, it will still let you claim for the costs of re­pairs and main­te­nance. The ATO has strict rules about what’s a re­pair and what’s an im­prove­ment, which must be writ­ten down over sev­eral years, so check if you’re un­sure. LIT­TLE Pest con­trol, land tax, coun­cil rates, in­sur­ance, prop­erty man­age­ment fees and even


sta­tionery are ex­tra de­duc­tions than when com­bined can de­liver in­vestors an early Christ­mas present.

The ATO Rental Prop­er­ties 2017 guide is avail­able online for free, and its online lodge­ment sys­tem myTax prompts you with claims cat­e­gories to help you not miss any­thing. If you use a tax agent, make sure they are across real es­tate in­vest­ment ex­penses.

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