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Should I start getting my investment property tax plans in place now?

March 8, 2021

With the end of the third quarter of the 2020/21 tax year just around the corner, now is the time for property investors to get their skates on and their tax affairs in order before 30 June.

For example, if your property needs a lick of paint or has a cracked window, don’t call on a handyman in late June. Tradies are flat out now, so to ensure this expense is recorded in the 2020/21 tax year, get the work done immediately. Moreover, some jobs are more significant, such as replacing roof tiles on an investment property damaged in a storm. Postponing this work will only serve to stall your deduction until July 2022 at the earliest and will create a cash flow issue at the same time.

Get your paperwork in order

Remember, you cannot claim any rental property costs if you can’t prove the expense with a receipt or bank statement. In preparation for the end of the tax year, get all your paperwork and expenses together in one place. Luckily, your Raine & Horne Property Manager will also keep tabs on repairs and maintenance work undertaken at your rental property.

Apart from repairs and maintenance, other investment property expenses you can claim this tax year include advertising costs, body corporate fees, council rates, water charges and land tax. Investors can also claim maintenance expenses such as cleaning, gardening, lawn mowing, and pest control. Landlords may also claim insurance (building, contents, public liability), interest expenses accrued against an investment loan, your property manager’s fees, income protection insurance, and some legal costs. This is a lengthy list of expenses and getting this paperwork in order now rather than waiting for 29 June will make life much more comfortable.

Capital improvements versus repairs and maintenance!

There is also the issue of claiming capital improvements. While repairing a cupboard door in the kitchen is a deductible expense this tax year, a completely new kitchen is deemed a capital improvement, which can be claimed as a depreciable item over time. That said, if you choose to have a kitchen or bathroom replaced in an investment property, be sure to keep all your receipts to make your accountants life easier.

Depreciation schedule assistance

The best way to keep tabs on capital improvements such as new carpets, kitchens, and bathrooms is by getting a depreciation schedule from a quantity surveyor such as BMT Tax Depreciation. A depreciation schedule is a report that outlines the cost of wear and tear on items such as carpets, blinds, stoves, and even light fittings depending on their age.

Depreciation schedules will cost you between $600 to $800. However, the full cost of the schedule can be claimed in your tax return this year, and the report will be worth their weight in gold by allowing you and your accountant to maximise the depreciation expenses associated with your investment property.

To find a suitable rental property, contact your local Raine & Horne Property Manager.