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Six tax tips for property investors



Some things only happen once a year. Christmas, Easter, birthdays and of course, tax time. And just like gift shopping, you should never leave your tax paperwork till the last minute. Staying on top of your admin and filing documents and receipts throughout the year ensures tax time is stress- and hassle-free.


So if you’re a property investor, here’s how to maximise your return when it comes to tax time.


1. Keep documents of everything

You’ll need to show proof of rental income and expenses. This includes everything from rental bond returns, insurance payouts and letting and booking fees – anything that generates an income. The amount you profited from your investment property will be added to your taxable income – so make sure you have all bank statements showing interest too. The more proof you have filed away, the less stressful tax time will be.


2. Set a realistic rental price

It’s easy to be biased and believe your investment property is worth top rental dollar – or taking out a big mortgage and expecting tenants to completely cover the monthly repayments. However, it’s your obligation to set a fair and realistic rental price based on your property’s location, size and the current rental market. Intentionally setting an exorbitant rental fee or failing to advertise the property could get you into a lot of trouble with the taxman.


3. The deal with ‘mates rates’

Sometimes it’s easier to keep friends and business separate. Charging your mates a special discounted rental rate can limit the deductions you can claim. Let’s say you lease the property to family members at half the market rate, you must then divide your deduction claims in half. Failing to genuinely lease out and advertise your investment property, and claiming deductions that don’t match your rental income will result in hefty penalties, unexpected tax charges and a place on the ATO’s ‘naughty’ list.


4. Know what you can claim on your holiday home

A holiday rental property can be a smart investment – and who doesn’t love the idea of owning a beach house – Summer Bay anyone? However, just because you pay fortnightly or monthly mortgage repayments, you are only eligible for rental tax deductions for the period when the home is advertised and available for rent, and when it is rented out. If your holiday house is used for personal or family breaks, or you lend it to friends at no cost, you cannot claim for those periods. Remember, the ATO will need to see proof of income and the associated deductions (e.g. cleaning costs, maintenance and advertising fees) so don’t try and cheat the system.


5. Claiming interest on your loan

One of the big perks of investing in property is that you can claim the interest charged on the home loan – or a portion of the interest – as a deduction. So, to make tax time a whole lot easier, file all loan statements as they clearly show the interest accrued (lenders should also send you an annual statement). But remember, you can only claim interest for periods when the house was leased and you were generating a rental income.


6. Make the most of deductions

To maximise your tax return, don’t forget about all the other expenses you can claim. The most common being:


  • Real estate management fees

  • Property advertising fees

  • Renters insurance

  • Council and water rates

  • Travel expenses to inspect your investment property

  • Bookkeeping fees

  • Cleaning at the end of a tenancy

  • Taxation advice relating to the property

  • Gardening and maintenance fees

  • Building and asset depreciation


There may be more things you can claim on tax than you realise. From solar garden lights to tennis court nets, see what else you could claim here.


Don’t let tax time turn you into a Grinch! By knowing your obligations and filing all related loan statements and expenses, you can enjoy a very merry EOFYS.

Your Choice Mortgage Brokers Pty Ltd ATF Halo Innovation Trust trading as Heart Mortgage Services - Australian Credit Licence 38643. The information contained herein is of a general nature only and does not constitute advice. You should not act on any information without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances. The views expressed here are not ours. While the information contained in this article may contain or be based on information obtained from sources believed to be reliable, it may not have been independently verified. Where information contained in this publication contains material provided directly by third parties it is given in good faith and has been derived from sources believed to be accurate at its issue date. To the maximum extent permitted by law: no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up to date or fit for any purpose; and no party or associated entities as mentioned is in any way liable to you (including for negligence) in respect of any reliance upon such information. This article may also contain links to websites operated by third parties who are not related to us. These links are provided for convenience only and do not represent any endorsement or approval by us.

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