Common errors of new rental property owners
“Buy land, they’re not making it anymore.” – Mark Twain
Purchasing real estate has been a dependable investment for generations of Australians. In general, rental property remains a solid place to park your extra cash to build long term wealth. Our Caulfield accounting office has qualified accountants that can offer you tax advice when you need it.
Property has a reputation of being less volatile than the share market, but this is not always the case. Property values can rise and fall depending on many factors, interest rates fluctuate which makes maximising allowable tax deductions a priority for property investors.
First time rental property owners often make mistakes when claiming deductions on their first tax return as a landlord.
The Tax Office has identified some of the most common errors rental property owners make, they include:
- Claiming rental deductions for properties not available for rent
- Incorrectly claiming deductions for properties available for rent for only part of the year
- Incorrectly claiming repair costs that are capital improvements
- Overstating deduction claims for interest on loans to purchase or renovate the property
Which deductions are allowable?
There are two categories deductions fall into:
- Expenses deductible in the year they were paid
- Expenses that are deductible over several years
Below are typical deductions for rental properties:
- Costs of phone calls or letters to tenants, agents, tradesmen, etc.
- Fees or commissions paid to real estate agents for collecting rents
- Secretary fees associated with rent collection or documentation
- Rent paid if subletting
- Cost of preparing or registering a lease of a property
- Legal expenses to eject a tenant
- Advertising for tenants
- Mortgage discharge fees
- Council rates
- Land tax
- Insurance premiums
- Bank charges on the rental account
- Pest control
- Cutting keys
- Cleaning expenses like rubbish removal
- Gardening expenses like trimming trees
- Professional fees for tax advice
- Service of tradesmen
- Servicing costs
- Security system monitoring or maintenance
- Losses and outgoings on leasing while on transfer of employment
Note – always keep accurate and comprehensive records to ensure you can claim expenses and pay the correct amount of tax.
What you cannot claim
- Disposal and acquisitions costs, like the purchase cost of the property, advertising expenses, stamp duty and legal costs
- Any expenses that your tenants pay, like utilities
- Any expenses not related to the rental of the property, like if you use it for a vacation home part of the year.
There are many other possible taxable deductions for rental properties owners that you may be allowed. If you have any questions regarding your deductions or want a full list of depreciation tables for capital expenditures contact this office and one of our business accountants can help.
Hillyer Riches Management Pty Ltd is a Corporate Authorised Representative (No 466483) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. AFSL / ACL No. 223135.This document contains general advice only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.
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