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Are you a rental property owner?

If so, it’s great isn’t it? You receive income from the rents, and you realise capital appreciation from the increased value of the property a rising tide raises all boats. In fact using the rental receipts is a great strategy you can pay your housing loan and other private expenses, and still claim a tax deduction now, while you will provide a passive income stream for yourself in your retirement. The key is buying and holding onto an investment property as soon as possible and taking full advantage of the tax allowable deductions and expenses. Getting educated about this investment strategy is easy, fun, and should be taught to your children.

I’m sure you also know that many of the expenses that you incur that are rationally related to your rental property are tax deductions against any income that you earn This is a big tax bonus that many people don’t realise exists. your losses, including depreciation against your rental properties, can be deducted against your ordinary income, not just your rental income. If you have multiple rental properties this can be a huge tax savings as rental properties are allowed to be depreciated over a 10 to 40 years period. There are many people who are leaving a lot of money on the table each year because they are not familiar with this. We can help you to understand and apply.

Improvements are not Repairs

There is a world of difference between the term “improvement” and the term “repair.” The ATO takes great exception to people who attempt to expense a kitchen remodel or a new roof on their rental property. Both of these projects would be considered an “improvement” and would have to be deducted over the lifespan of the component.

Repairs on the other hand are small projects that keep the rental property operating smoothly – like a leaky kitchen tap that gets replaced, or a broken toilet flange, or a failed smoke alarm. These repairs are expenses which can be deducted in the tax year for which they were made.

Travel expenses can be claimed as an expense as well if you are making a trip to maintain the property, or have a discussion with the tenant, or to collect a rent check. However, if the transportation expense was borne due to some planned improvement like a bathroom remodel then the travel expense would not be expandable and would be allowed to be depreciated with the improvement.

Common Expenses That You Shouldn’t Forget

There are numerous legitimate expenses for rental property owners. They include mortgage interest, insurance expense, property taxes, gardening maintenance, legal fees, property management fees , Body corporate fees (levies) , leasing expenses, advertising expenses, damages to the property, office supplies to run your property business (if applicable), travel expenses to inspect the properties, Depreciation Expenses and bank fees to name the common ones.

Professional Property Managers Keep Records and You Should Too.

If you hire a competent professional property manager to run your rental property business they will keep good records for you as they are required to by the law. Professional property managers will provide you with timely monthly statements which include income, expenses, invoices, and notes. Also, you should receive a detailed Profit and Loss statement in early July of the following year. If you don’t receive detailed statements like this you should ask them to do so or seek to hire another property manager.

If you manage the property by yourself you should be keeping these records (and copies or scanned files) of every document that is created related to the rental property business. This is crucial for two reasons: 1) tax audit preparation, and 2) litigation preparation.

NGA Accounting helps a number of individuals to source and invest into residential and Commercial Properties.