If you have income from investment properties, now is the time to start gathering your records and reviewing your expenses for the 2021 financial year.
Income to Declare
All income earned from each property must be declared. If you have multiple properties, keep the records for each property separate to make the tax return more efficient.
- Rent received, whether paid directly to you or through an agent or through an online management platform. Rent includes recurring regular amounts as well as any lump-sum amounts paid in advance.
- Rental bonds returned for example if the tenant caused damage or defaulted on rent payment.
- Insurance payouts received as compensation.
- Expenses reimbursed by the tenant, for example, if they have caused damage and you have paid for the cost of fixing the damages, or if they have reimbursed you for water.
- Extra fees received, for example letting or booking fees.
- Government rebates, for example for installation of solar utilities.
You will need statements or recipient created tax invoices from agents or management platforms and documents for all other payments received.
Deductible expenses for the property are different for residential and commercial properties. Not all expenses related to owning a property are allowed as deductions, so it’s important to check what you can claim.
- Expenses you may be able to claim this year
- Advertising for tenants
- Body corporate fees
- Council rates
- Water supply charges
- Land tax
- Cleaning, gardening, pest control and property maintenance
- Agent fees
- Repairs and maintenance
- Some legal expenses
- Loan interest
Expenses you may be able to claim
- Vehicle and travel expenses – use a travel diary to record details of trips taken for your employment.
- Clothing, laundry and dry-cleaning expenses – you can claim for occupation-specific clothing, uniforms and protective gear.
- Home office expenses – there are special rules this year for employees working from home because of COVID-19. You will need records of the hours you have worked from home to claim the ATO special rate.
- Self-education expenses – some education expenses that relate to your current employment are claimable.
- Tools and equipment – if you buy gear to help you in your job, this may be claimable. Small tools of the trade, protective items, professional references and laptops are some examples of equipment you may be able to claim.
There are some expenses that need to be claimed over a longer period such as several years or decades. These can include borrowing expenses, capital expenditure, depreciation, initial repairs and capital works.
Some expenses cannot be claimed. These include stamp duty, loans and repayments, some legal expenses and some insurance premiums.
Get Help to Simplify Your Property Records
Tax matters for property investors can be complex. The ATO keeps a close eye on tax returns that involve property investment, as it’s easy to make mistakes. There are other matters to consider such as the period of rental availability, private use of the property, capital gains tax, legal contracts and positive or negative gearing.
We’d love to help ensure you are claiming the right deductions to make the most out of your investment property this year and beyond.
Book a time with us now to prepare for your tax return and we’ll make sure you make the most of all applicable tax deductions this year.
If you have any further queries, please do not hesitate to contact our office on (03) 5366 0700 or send us an email at