If you are negatively gearing a property and struggling with cash flow, you may be able to arrange to have a PAYG Withholding Variation Application lodged. This enables you to have less tax taken out of each pay packet!
Generally, travel expense deductions relate to the cost of travel that a taxpayer incurs to inspect or maintain rental properties. You can claim a deduction for travel expenses for:
• Preparing the property for new tenants (except for the first tenants)
• Inspecting the property during or at the conclusion of tenancy
• Undertaking repairs, where those repairs are a consequence during being rented out
• Maintenance of the property, such as gardening, whilst it is rented or available for rent
• Visiting your agent to discuss your rental property
You must ensure that you keep all receipts for any deductions that you wish to claim. The ATO is constantly increasing their audit activity and it is important that you can justify your claims.
A strategy to defer tax, that may be attractive if you expect to pay tax at a lower rate next year, is to wait until early in the new financial year before chasing tenants for unpaid rent. This should be considered in the weeks leading up to 30 June.
If your investment property was built after 18 July 1985 then it is worthwhile considering a depreciation schedule from a quantity surveyor. You can quite often recoup their fee in your first tax return as deductions can be in the thousands each year.
Below is a handy checklist of typical deductions related to rental properties that can be claimed:
• Body Corporate Fees
• Borrowing Expenses (for example, stamp duty and legal fees on mortgage)
• Building depreciation
• Cleaning Costs
• Council Rates
• Depreciation of fixtures and fittings (light fittings, carpets etc)
• Insurance Costs
• Interest on loans (including interest prepaid up to 12 months in advance) and bank charges
• Land Tax
• Property Agent Management Fees
• Repairs and Maintenance
• Telephone, postage and stationary
• Travelling Expenses
• Water Rates
The above issues need to be considered carefully, so speak to Tardrew Partners to ensure you are making the correct tax planning decisions in relation to your investment property.
The above information is intended as a guide only to provide a quick overview of some of the general information relating to investment property tax implications.
Please contact Tardrew Partners to obtain advice tailored to your individual circumstances.