Taxing time for investors
The start of a new financial year means one thing to most people — tax time.
If you rent out a property, it is important you gather all your records, expenses and paperwork in preparation for doing your tax return.
Being diligent with keeping records from when you first buy your investment property will make this time of year less daunting.
Your property manager can assist by providing financial year statements detailing all transactions relating to your property throughout the 12-month period. You will need proof of all expenses so you can claim everything you are entitled to.
If you have carried out any maintenance or made any improvements to the property, you will need to provide evidence of this expenditure.
It is vital 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.
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.
Come tax time, you will be looking to claim deductions for related expenses for the period the property has been rented out.
The Australian Tax Office has recently advised it will be targeting expense claims on investment properties this year, especially for travel claims, so it is very important to be prudent when making claims.
Deductions can be made on things like management and maintenance costs, which can be claimed immediately, and borrowing expenses, depreciation and capital works spending, which are usually deducted over several years. The important thing to remember is deductions can be claimed only if the property is being rented out or is genuinely available for rent.
Being available to rent references the period when the property is advertised for rent and receiving widespread exposure to potential tenants.
If you have sold your investment property in the past financial year, any capital gain made on your property will be subject to capital gains tax.
Find out more about how to lodge your tax return as a property investor at ato.gov.au, or from your registered tax agent. Hayden Groves is the president of the Real Estate Institute of WA.