STAY UP TO DATE WITH LOCAL REAL ESTATE.
The start of a new financial year means one thing to most people — tax time.
If you’re an investor who rents out your property, it’s important to gather all records, expenses and paperwork in preparation for doing your tax return.
Keep a good record
Be diligent with keeping records from when you first purchase the investment.
Your property manager can assist by providing financial year statements. You’ll need proof of all your expenses so you can claim everything you’re entitled to. If, throughout the year, you’ve carried out any maintenance or made any improvements to the property you’ll need to provide evidence.
It’s vital that records are kept for a minimum of five years and, in some cases, for at least five years after the property is sold.
In your tax return you must include the full amount of rent and other rental-related income you receive, regardless of it being paid to you direct or to your property manager.
In addition to regular rent payments, rental income can include rental bond money you were entitled to retain, letting and booking fees you receive, and any insurance claims that were paid.
Deductions can be made on things like management and maintenance costs, which can be claimed immediately, borrowing expenses, depreciation and capital works spending, which are usually deducted over several years. The important thing to remember is that the deductions can only be claimed if the property is being rented out or is genuinely available for rent.
Being available to rent means the period that the property is advertised for rent and receiving widespread exposure to potential tenants.
Capital gains tax
If you’ve sold your investment property or house in that past financial year, any capital gain made on the property will be subject to capital gains tax. In this case, you’ll need to refer to records of the date and costs of buying the property so you can work out any capital gain, or loss, when you sell it.
If you’re an investor or if you’re thinking of investing, you can find more information about property tax on the Australian Taxation Office website or from your registered tax agent.