It’s coming up to that time of year again when you’re scrambling around looking for receipts, trying to remember what you’ve paid for over the past year, and whether you can or cannot claim that expense in this year’s tax return.
To help jog your memory, here are some tax-deductible benefits you may be able to include in your tax return. These suggestions are only a guide and we strongly recommend you seek financial advice and/or contact the Australian Tax Office (ATO) for clarification when lodging your tax return.
In the recent federal budget, the government announced as of 1 July 2017, travel expenses will no longer be a tax-deductible benefit. This is because there was a suspicion some investors may have been incorrectly obtaining this deduction by including situations for “private travel purposes”.
As the date of implementation is 1 July 2017, you may be able to make some claims on the past year for travel to collect rent, maintain or inspect your property or possibly other reasons, so check with your accountant or call the ATO to confirm.
The government is also limiting plant and equipment depreciation deductions to outlays actually incurred by investors in residential properties. This is to address concerns that some plant and equipment items have been depreciated by successive investors in excess of their actual value.
Plant and equipment forming part of residential investment properties may continue to give rise to deductions for depreciation until either the investor no longer owns the asset or the asset reaches the end of its effective life. However, subsequent owners of a property will be unable to claim deductions for plant and equipment purchased by a previous owner of that property.
Once again, check with your accountant or call the ATO to confirm your situation.
Managing the Maintenance
Any work carried out to prevent deterioration or fix existing deterioration is considered ‘maintenance’. This may include painting a rental property, oiling, brushing or cleaning something that is otherwise in good working condition and maintaining plumbing.
Work to make good or remedy defects in, damage to, or deterioration of the property are considered ‘repairs’ and can be included as a cost in your tax return.
These include repairs such as replacing part of the guttering or windows damaged in a storm, replacing part of a fence damaged by a falling tree branch and repairing electrical appliances or machinery.
Improvements to your property
You cannot claim a deduction for the total cost of improvements to your rental property in the year you incur them.
According to the ATO website, capital improvements (such as remodelling a bathroom or adding a pergola) should be claimed as capital works deductions.
Your general running costs such as council and water rates, utilities, strata fees, insurance and management expenses can usually be classed as tax-deductible expenses. You may also be able to claim against the interest on your mortgage, cleaning, gardening, pest and safety inspections.
For more information about what you can and cannot claim for, check the Residential Rental Properties ‘expenses you can claim’ section on the ATO website – www.ato.gov.au
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