They say nothing is certain except death and taxes – and each can be equally stressful. However, there are many deductions property investors can make to reduce your tax burden and improve your financial situation.
Here are our top five tax deductions you can make to keep your tax time stress to a minimum:
1. Repairs and maintenance
It’s important to remember that repair costs for any damage that existed when you purchased the property are generally not tax deductible. However, you may be able to claim depreciation on repair costs as a capital works deduction. You may also be eligible to claim general maintenance (such as gardening or cleaning) and pest control costs. Also keep in mind the difference between repairs and replacements. For example, repairing a broken oven is a straight deduction, while you can claim depreciation on a new oven.
This is where it gets a little complicated. Depreciation is claimed on the wear and tear of your property over a period of time. You can generally claim deprecation on Plant and Equipment (such as appliances) and Building Allowance (the construction costs of the building). However, to claim depreciation you’ll need to hire a Quantity Surveying company to prepare a depreciation schedule.
3. Travel costs
If you have to travel to your investment property, you may be eligible to claim the associated travel costs. Deductible travel costs include trips made to inspect, repair or maintain the property – but remember to keep receipts for all your travel costs or the ATO will likely take issue with your deductions.
4. Capital gains tax
Capital gains tax is payable on any profit you make when selling your investment property. Depending on your financial situation, it may be beneficial to postpone selling your property until after June 30. And remember, if you sell your investment property within 12 months of purchasing it, you’ll usually be required to pay a significantly higher capital gains tax rate.
5. General fees and costs
As a landlord, you may be eligible to claim a range of general fees and costs associated with your investment property. Bank fees relating to the mortgage on the property are generally deductible, as are strata and property management fees, and costs for building, contents and public liability insurance. You may also be able to claim council rates, legal expenses and money you’ve paid to advertise the property for tenants.
Most important, however, is to seek advice from a professional accountant with experience in property investment tax. They’ll ensure you’re maximising your deductions while not risking putting the ATO offside.
Looking for your next investment property? Talk to the experts at Pavilion Property.