What Property Investors Should Know About Tax Season 2024
As the new financial year begins, property investors should remember one important task — preparing and lodging your tax return as soon as possible.
Whether you are an experienced investor or new to the property market, staying informed and organised is key to boosting your returns and staying compliant with tax regulations.
In this blog, we’ll explore essential insights and practical tips to help property investors navigate tax season 2024 with confidence and efficiency.
What Property Investors Should Know
Understanding the complexities of tax obligations and potential deductions can significantly impact your financial outcomes. Here’s a few key considerations to help manage your tax affairs effectively.
- Keep a Good Record Log
Conducting record-keeping from the moment you purchase your investment property will make tax time significantly more manageable.
Your property manager can assist by providing financial year statements detailing all transactions related to your property throughout the 12 months.
Ensure you have proof of all expenses to claim everything you're entitled to.
Remember, records must be kept for a minimum 5 years and, in some cases, at least 5 years after selling the property.
- Declaring Income
Make sure to include all rental income, including rent and other related payments, on your tax return, whether paid directly to you or through your property manager.
Rental income includes regular rent payments, rental bond money retained, letting and booking fees received, and any insurance claims paid.
What Deductions Can You Claim?
During tax time, remember that you can claim some deductions immediately while others can be claimed over time.
For example, management and maintenance costs are typically immediate deductions, while borrowing expenses, depreciation and spending on capital works can generally be claimed over time.
To claim deductions, the property must be rented out or genuinely available for rent. This refers to periods when the property is advertised for rent and exposed to potential tenants.
Common Mistakes to Avoid
There are a few key common mistakes to avoid when preparing and lodging your tax return. These include:
- Claiming excessive interest and deductions for properties not genuinely available for rent.
- Failing to prove that the property was available for rent, especially during vacant periods.
- Incorrectly apportioning expenditure.
Top Tips for Property Investors During Tax Season
The Australian Taxation Office shares these tips for property investors:
- Getting Initial Repairs and Capital Improvements Right: Understand the difference and how to claim them.
- Claiming Interest on Your Loan: Ensure all interest expenses are appropriately claimed.
- Claiming Borrowing Expenses: Borrowing costs can be claimed over 5 years.
- Claiming Purchase Costs: Costs like legal fees and stamp duty can be included.
- Getting Construction Costs Right: Accurate reporting of construction expenses is crucial.
- Claiming Body Corporate Fees and Charges: These can be claimed if they're related to the rental property.
- Apportioning Expenses and Income for Co-Owned Properties: Properly divide expenses and income among co-owners.
- Apportioning Expenses for Private Use of Your Property: Only claim expenses related to the rental period.
- Keeping the Right Records: Maintain detailed and organised records for all transactions.
- Getting Your Capital Gains Right When Selling: Ensure accurate calculation and reporting of capital gains.
These guidelines and tips can help you navigate tax season 2024 more smoothly and ensure you are boosting your potential deductions while staying compliant with ATO regulations.
Please note: the above information is of general nature only. If you require specific advice suited to your unique circumstances, it’s best to speak to a qualified accountant.
Sources:
Groves, H. Tax time: What property investors need to know. Tax time What property investors need to know (reiwa.com.au)
Williams, S. (2024, June 21). What property investors need to do now to prepare for tax time. What property investors need to do now to prepare for tax time (domain.com.au)
2024 Tax Time toolkit for investors (ato.gov.au)
