The do’s and don’ts for property investors this tax time

According to the accountant, the key tip is to ensure that property owners keep good records. 

“The golden rule is if you can’t substantiate it, you can’t claim it, so it’s essential to keep invoices, receipts and bank statements for all property expenditure, as well as proof that your property was available for rent, such as rental listings. Also, be aware that both your income and expenses may look very different to normal because of the impact of COVID-19,” he said.

He highlighted that a tax agent is a “must have” for property investors – they can point you towards those deductions you didn’t know you could claim, can accurately work out what’s deductible and what’s not, while their fee is tax deductible.

Key deductions investors miss

Mr Chapman noted that property investors often overlook key expenses, which ends up costing them come tax time. 

As well as the obvious deductions like mortgage interest and repairs, you may not know that you can claim for the following:

• Prepaid expenses. If you pay an item of expenditure this year that wholly or partly relates to next year, you can a claim a deduction for the full amount this year. This is particularly useful with expenses that straddle the tax year, such as insurance policies or subscriptions.
• If you use your home phone, computer or internet services, or your mobile phone as part of the management of your investment property, you can claim an appropriate proportion as a tax deduction.

Going beyond prepaid expenses, Mr Chapman told Smart Property Investment that investors are entitled to depreciation on the asset. 

“It can also be worthwhile getting a quantity surveyor to quantify the depreciation claims that you are entitled to. Depreciation is generally one of the larger deductions. It is difficult to correctly work out, and many home owners miss out on potential deductions by incorrectly claiming,” he said.

What about the don’ts?

While highlighting the perks investors get this tax time, Mr Chapman also warned investors against attempting to con the taxman.

His tips of things to avoid include: