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Every end of financial year, property investors are able to claim a variety of deductions and tax benefits for out-of-pocket expenses and losses associated with residential investment property. Property investors must be extremely careful in ensuring they understand what can and can’t be claimed.

Concerns about housing supply and affordability have prompted new measures in government policy and extra attention from the ATO on what claims and deductions property investors make this tax season. Below we look at what can and can’t be claimed so you can make the most out of tax benefits this year.

What Can You Claim?

So long as the property exists for income producing purposes and is ‘available for rent’, investors can make deductions relating to:

 

The following deductions may also be made but are subject to strict or changing rules:

Property investors cannot make claims on the following:

Once you know you are entitled to a deduction, you should be aware of when it can be claimed. For example, your property needs to be available for rent to enable many running expenses to be claimed from them.

Additionally, some repairs and maintenance cannot be claimed in the first year as the price paid for a property reflects the condition before tenants move in. There are also timing issues when claiming certain expenses at the end of a tenancy.

Depreciation Schedule

It’s a good idea to organise a depreciation schedule if your property was built after 18 July 1985. Engage a registered quantity surveyor to value the building plus and fixtures and fittings. This allows you to maximise the deduction claims you are entitled to. The cost of the property valuation is also deductible in most cases!

Be Honest and Keep Records

The ATO is paying very close attention to deductions being made by property investors. Ensure you can substantiate any expense claims you make by keeping all of your receipts. Bank and credit card statements often suffice; however, receipts offer concrete security.

This year, the ATO will pay special audit attention to:

Every year the ATO contacts thousands of property investors to closely inspect their claims. Avoid making any deductions you can’t prove you’re entitled to in order to avoid finding yourself in trouble.

Some Additional Tips

There are a range of other ways you can reduce your overall amount of tax you pay. Depending on your circumstances, you may want to prepay interest for the next financial year to reduce your tax liability in the current year.

If your property is negatively geared, it may be worth submitting a PAYG withholding variation, allowing you to reduce the amount of PAYG tax that comes out of your pay. If you’re trying to sell your property, consider exchanging contracts after 1 July to defer tax for another year and achieve strong capital growth.

If you’re thinking about purchasing an investment property, get in touch with one of our agents for assistance. If you’re thinking of renting out your property, we can give you a free appraisal.

Please note the information in this article is intended to be of general nature and does not take your personal circumstances into account. Consider consulting a registered accountant or tax agent for specific advice.