Property investors who make claims they are not entitled to, can get themselves into deep water with the Tax Office but there are some helpful hints to assist property investors capitalise on their allowable deductions and avoid unwanted interest from the Tax Man.
The ATO monitors property investor claims and often issue warnings or notices of the types of common mistakes made, so investors should at least visit the ATO website.
But, the most common mistakes made by property investors include making claims against:
- Immediate initial repairs or capital improvements including structural repairs and improvements which are seen more as capital works deductions such as remodeling a bathroom or building a pergola
- The portion of a loan that is used for both investing and private purposes
- Inspection of a rental property while on holiday in the area, which is the real purpose, and the inspection only incidental
- Expenses relating to the private use of a property such as a holiday home
- A property that is not genuinely available for rent including periods while it is undergoing construction or renovation
- Borrowing expenses in the first year rather than being spread out over the term of the loan or five years, whichever is the lesser of the two.
The best advice though is to seek the services of a qualified professional such as an accountant or financial advisor when looking at preparing their tax return.
Everyone’s personal financial circumstances are different and the tax implications of the individual property investment strategy may differ, so it is important to discuss it with someone who has the necessary expertise and experience.
It is also a good idea to look at using the services of a respected and qualified property manager, such as those with First National, because they have the requisite forms, processes and systems to effectively manage a property as well as maintain and keep appropriate records for tax and accounting purposes.
Posted from 111-113 Wilson Street, Burnie.