Tax time can cause great anxiety for investors who unwittingly make claims they are not entitled to, getting themselves into deep water with the Tax Office. First National Real Estate Pope Nitschke offers these helpful hints to assist property investors to capitalise on their allowable deductions and avoid unwanted interest from the Tax Man.
“Property is an increasingly popular form of wealth creation for many Australians, but often they lack the accounting and financial knowledge to know what it is they are entitled to claim, or how much they can claim and what is not an accepted tax deduction,” David Nitschke, principal First National Real Estate Pope Nitschke said.
“The ATO monitors property investor claims and often issue warnings or notices of the types of common mistakes made, so investors should at least visit the ATO website.
“Reports say more than 1.5 million people claim in excess of $24 billion in rental deductions in a year, which explains the ATO's vested interest and continued focus on monitoring rental property deductions.”
According to David Nitschke, the most common mistakes made by property investors include making claims against:
- Immediate initial repairs or capital improvements including structural repairs and improvements which are seen more as capital works deductions such as remodeling a bathroom or building a pergola
- The portion of a loan that is used for both investing and private purposes
- Inspection of a rental property while on holiday in the area, which is the real purpose, and the inspection only incidental
- Expenses relating to the private use of a property such as a holiday home
- A property that is not genuinely available for rent including periods while it is undergoing construction or renovation
- Borrowing expenses in the first year rather than being spread out over the term of the loan or five years, whichever is the lesser of the two.
Mr Nitschke said investors should seek the services of a qualified professional such as an accountant or financial advisor when looking at preparing their tax return.
“Everyone's personal financial circumstances are different and the tax implications of the individual property investment strategy may differ, so it is important to discuss it with someone who has the necessary expertise and experience,” Mr Nitschke said.
As an experienced and licensed real estate agent, David Nitschke says it is also a good idea to look at using the services of a respected and qualified property manager who will act on your behalf and with your best interests at heart.
“A property manager, such as those with First National, have the requisite forms, processes and systems to effectively manage a property as well as maintain and keep appropriate records for tax and accounting purposes,” Mr Nitschke said.
“Proper record keeping and tracking is more than half way to ensuring the investment property yields the optimal return.”