Tax time can be daunting, but it doesn’t have to be. Preparation ahead of your tax return appointment can save you time and help maximise your tax refund.
When using a new Accountant, always provide your last tax return. This will include your personal details, tax file number, income streams, tax offsets, deductions, and other relevant information previously claimed.
If you’re a property investor, there are also certain documents required to ensure you claim the biggest tax refund possible. Here’s what you should prepare for your tax return appointment:
In this article we will look at:
- Tax Depreciation Schedule
- Repairs and maintenance expenses
- Borrowing expenses
- Rental fees
Tax Depreciation Schedule
Depreciation is a deduction for the decline in value of items as they wear and tear over time. A BMT Tax Depreciation Schedule covers all deductions available over the lifetime of the property, broken down into plant and equipment and capital works deductions.
Eligible plant and equipment assets can be depreciated based on their effective life. However, assets valued less than $300 can be claimed in full in the same year, while assets valued at less than $1,000 can be tallied into a low-value pool to increase the depreciation deductions. Assets which fall into the low-value pool can be claimed at a rate of 18.75 per cent in the first year and 37.5 per cent from the second year onwards.
Capital works deductions (for the building structure) can be claimed over forty years at 2.5 per cent of the total cost per year.
To arrange a tax depreciation schedule, Request a Quote today.
Repairs and maintenance expenses
Any repairs and maintenance can be claimed as an immediate deduction with your Accountant by providing the relevant receipts and invoices. However, if you complete any renovations or repairs which are considered capital improvements (where you improve the value of the asset beyond its original state at the time of purchase) these items will need to be depreciated as either capital works or plant and equipment depreciation. To learn more, read our Maverick article regarding repairs and maintenance and capital improvements.
Before your tax return appointment, you must prepare the income of your investment property, including the number of weeks rented and the total rent received. You can only claim rental property tax deductions for the period of the year that the property was tenanted or actively advertised as available for rent.
When you first purchase your investment property the borrowing expenses involved, such as loan set-up fees, can be claimed. As outlined by the Australian Taxation Office, if your total borrowing expenses are more than $100, the deduction is spread over five years. If the total borrowing expenses are $100 or less, you can claim a full deduction in the income year they are incurred. A borrower can also claim a tax deduction for interest on an investment property loan within the same financial year because it’s an expense incurred in earning what is known as assessable income.
As an investor, you can claim any rental advertising and property management fees charged in the same year that you paid for them. Be sure to keep all receipts and rental statements to substantiate your claims.
If you claim rental income on your property, your homeowner’s insurance becomes tax deductible. Other insurances that may be tax deductible include:
- public liability
- private mortgage insurance.
Visit BMT Insurance to get a free quote to organise your insurance.
As a property investor, you may be entitled to claim an immediate deduction for body corporate fees and charges, council rates and land tax.