At this time of year we are all starting to think about the end of financial year and tax time.
Questions like ‘where are all those receipts’ and ‘gee can I claim for that’ are all starting to come to mind and a maze of issues start to cloud the process in getting these items together for the imminent lodging of our 2013/2014 ATO returns.
As a property investor the task can be even greater, so for many investors a deduction checklist should help ensure you don’t forget any immediately-deductible expenses.
Your tax time checklist should include:
- Interest on your investment loan – If your property is negatively geared, the shortfall between the rental income and the deductible expenses (including loan interest) is deductible against your other income
- Land tax
- Council rates and water charges
- Body corporate fees and charges for day-to-day administration as well as contributions to a general-purpose sinking fund
- Insurance – Consider building, contents and public liability insurance
- Repairs and maintenance
- Real estate agents’ fees and commissions for managing your property, inspecting the property and collecting rent – Remember that agents’ commissions to buy or sell your property are non-deductible but form part of the CGT cost base
- Gardening, lawn mowing, cleaning
- Pest control
- Leases – Remember preparation, registration and stamp duty on leases
- Mortgage discharge fees
- Advertising for tenants
- Tax-related expenses – Including fees charged by quantity surveyors to support claims for depreciation
- Depreciation – Remember to take into account Div 43 building allowance, plant and equipment, and low value pool items
- Bank charges
- Electricity and gas (when not paid by tenants)
- Limited legal expenses for running the property – However, most legal expenses (including for the purchase and sale of a property) are regarded as non-deductible capital expenditure, so keep records as these costs should reduce the eventual capital gains tax payable on the sale of your property
- Service of equipment such as water heaters
- Travel (to inspect your property)
It is a good time to start preparing all these items now so that you do not miss anything in the preparation of your ATO returns and your are able to maximise your allowable deductions and rebates.
Martin Josselyn is a licensed agent, qualified financial planner and mortgage broker, and has over 15 years experience in direct property investment portfolios.