ALMOST EOFY

With less than one month to go until the end of the financial year, you have probably read the stories about the ATO having their sights set on landlords.

There really is nothing to be alarmed about when you have finance and property management experts on your team.

The ATO is simply responding to some research suggesting that 90 per cent of rental property owners are getting their returns wrong. One mistake is leaving out income; another is incorrectly apportioning loan interest where part of the mortgage was used for private purposes; so a focus on interest expenses is likely. Basically, you can only claim interest on a loan used to purchase a rental property to earn rental income.

This EFO is no different. Landlords and their tax agents should be diligent in reviewing their records before lodging their tax returns.

Depreciation is one area that landlords can fail to maximise, with some investors thinking their property is too old to carry depreciation deductions.

Claiming depreciation as a tax deduction is available on almost all investment properties regardless of age.

If you don’t have a tax depreciation schedule, get one right away. Any time an update is made to your investment property, you should contact your depreciation schedule provider.

There are two types of depreciation deductions that can be claimed. The first is on capital works –  a property’s structure and permanently fixed items such as kitchen cupboards, doors and sinks –  which can be claimed for up to 40 years depending on the type of construction and date construction commenced.

The second is on plant and equipment – removable items like carpet and blinds – and the ATO recognises more than 6,000 different plant and equipment assets.

You don’t have to do major renovations to bring depreciation deductions into play. You might just be adding a garden shed or installing a new air conditioner, a pathway.

Your best advice about anything tax-related will come from a specialist with expertise.

FYI – The ATO is also giving extra scrutiny to people working from home (WFH), advising that taxpayers need to be aware of some WFH changes since they may have completed their last tax return.

SOURCE: RE/MAX Australia