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Tax tips for property investors

Tax tips for property investors

It’s time to review any tax considerations you might have for your investment property at the end of the financial year.

If you have income from an investment property, it's important to know how to best manage your tax claim.

What are your obligations?

As a rental property owner you must be able to demonstrate that you’ve made every effort to rent your property out.

Some of your considerations might include:

  • Collecting and producing evidence that it’s been advertised for rent
  • Making sure the property is in good enough condition to attract renters
  • Setting a realistic rental price
  • Removing unreasonable restrictions that may deter renters

What income must you declare?

When you lodge your tax return, you need to tell the Australian Taxation Office (ATO) how much rent and rental-related income you received.

This can include:

  • Rental bond returns – if, for example, your tenant defaulted on rent or caused damage to your property
  • Insurance payouts such as when you receive a payment to compensate for damage to your property
  • Letting and booking fees you received
  • Any amount a tenant pays you to cover the cost of repairs for which you then claimed a deduction (assuming, for example, the tenant has caused the damage themselves)

What expenses can you claim?

Property investors can claim deductions for several expenses while their property is rented or available for rent.

These can include:

  • Management costs such as property agent fees and commission
  • Land tax
  • Body corporate fees and charges
  • Maintenance costs - for example cleaning, gardening, pest control, repairs and maintenance
  • Interest expenses
  • Insurance (building, contents and public liability)
  • Some legal expenses
  • Depreciation

You may be able to claim some of these costs now, but others, such as expenditure on capital works, may be deducted over time.

What can’t you claim?

Make sure you don’t claim any deductions that aren’t in fact deductible.

These can include:

  • Expenses someone else has paid, for example electricity bills paid by your tenant
  • Property purchase costs, for example advertising costs, stamp duty

For the most up-to-date requirements regarding taxation and residential rental properties, you can refer to the Australian Taxation Office (ATO) website.

Lodging your tax return

What you claim on your tax return depends on how you rented your property out, and whether or not you’re the sole owner, for example, if you own the rental property with someone else, you can only declare your share of any income the property generates and claim your share of any expenses. For the most up-to-date information, please refer to www.ato.gov.au

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information. Commonwealth Bank is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.