With tax time just around the corner, the team at Buxton have put together these tips to help property investors manage their obligations and get the most out of their tax return this year.

1. Be Aware of What You Can Claim

Maintaining an investment property comes with a number of costs. Make sure you claim all the available tax deductions to help you save and reduce the impact of those costs. This includes:

• Property management fees and commissions

• Depreciation

• Insurance

• Council rates

• Interest expenses on a property loan

• Advertising for new tenants

• Certain legal fees

• Any costs associated with travelling to inspect your investment property

• Expenses for upkeep such as cleaning, pest control, gardening, maintenance and repairs.

2. Be Aware of What You Can’t Claim

Keep in mind that you can’t claim deductions on expenses someone else has paid, for example, bills paid by your tenant. You also can’t make claims on property purchase or sale costs. This includes stamp duty, conveyancing fees and building inspections. 

3. Recognise Income You Need to Declare

Ensure you have a clear idea of all the income you’re required to declare. This includes rent payments you receive as well as any money from the bond you’re entitled to keep, insurance payouts, booking fees (for short-stay accommodation) and additional lump sum payouts related to your property.

4. Keep Accurate Records

Maintain accurate records of all income and expenses related to your investment property. This information must not be changed or damaged and kept for five years. Take photos of receipts to simplify record keeping and help protect them from loss or damage.

5. Create a Depreciation Schedule

Engage a qualified quantity surveyor to help you accurately assess and claim depreciation on your investment property. This involves identifying all depreciable assets and determining their values so you can maximise your available tax deductions and access all potential savings.

6. Know the Difference Between Repairs and Improvements

The difference between repairs and improvements is essential for property investors to understand for compliance and accurate accounting. Repairs are tax-deductible in the year they occur and cover costs required to restore a property to its original condition. Examples include fixing a broken window, replacing electrical wiring or addressing plumbing issues. Improvements are not tax-deductible and cover any works that could be seen to upgrade the property rather than restore it. For example, replacing a roof with a better quality roofing material.

7. Determine the Cost Base of Your Property

While you can’t claim costs related to the sale or disposal of a property, these costs can form part of the cost base of the property. Figuring this out is important as it can affect the amount of capital gains tax you’re required to pay. Property investors can deduct the cost base from their property income to generate their gross capital gains. Keep in mind that what you need to pay is dependent on a variety of factors and you should speak to an accountant for advice specific to your circumstances. 

8. Seek Professional Advice

Taxation is complex and depending on your circumstances and how your finances are organised, there are a variety of additional ways you can save during tax time. For example, strategies like trusts, PAYG variation and negative gearing can help improve asset protection and generate further tax savings. 

On the other hand, there may be additional obligations you might not be aware of that affect you. Consulting with property experts, tax advisors and accountants that specialise in property investment is the best approach to navigating the complexities of property investment taxation.

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