Tax time is upon us and many Australians are once again finding themselves unprepared. If you have an investment property, then your accountant is relying on you to provide them with a slew of accurate information to help them maximise your returns. Whether you’re new to owning an investment property or simply know you’ve been a little lax in past years, this guide will help you to be prepared for this next financial year and into the future.
The documents you should have at the ready
To help you make the most of your investment property, you’ll need to keep detailed records of all your expenses. When you’re preparing to head in for your appointment with your accountant, be sure to bring along your loan documents. If your property is new, you’ll need to take along the records from your sale, including your contracts, conveyancing documents, borrowing expenses, title deed, depreciation schedule (if you have one) and a record of any additional costs that went into buying the property.
If you’ve been putting your investment property to work in the rental market in the past year, then there are additional documents you’ll need. To begin with you’ll need proof of earned rental income and detailed records of all your expenses. You’ll also need to provide evidence of any periods where your property was used privately or was your primary residence. If you were unsuccessfully trying to rent it out at any time, then proof of your efforts can help with your deductions.
Deductions you can claim for
For new investors, knowing what deductions you can claim is often the biggest concern at tax time. For your initial tax periods you can claim for things such as:
– loan interest
– rates and taxes (including council and water rates and land tax)
– property management fees
– body corporate fees
– and repairs and maintenance relating to periods where the property is occupied by a tenant.
If you’ve been operating an investment property for several years, you can also claim deductions for capital works (also known as building costs) and borrowing costs.
It’s important to note that you only claim deductions for the periods where the home is occupied by a tenant, which is why it is so important to keep thorough records of your tenant history and rental income. Incorrectly lodging an investment property tax return can result in fines and penalties.
How to be prepared for next year
Feel like tax time got away from you this year? Ensure you are ready for next year by creating your own record keeping systems. For physical documents, such as contracts and conveyancing documents, get a document filing system that will allow you to group them by date or document type so you can easily find exactly what you’re looking for.
Track all your rental payments and expenses using a spreadsheet or even professional software. You should also get into the habit of scanning all your receipts so you don’t have to start a manic search on June 30 each year.
Article provided by: www.therealestateconversation.com.au