Are you a real estate professional looking to maximise your tax return this year?
Do you know which expenses you can claim and how to organise your records for a seamless tax season?
Understanding your tax obligations and eligible deductions can make a significant difference in your refund.
This blog will walk you through everything you need to know to stay compliant with ATO regulations and optimise your tax return.
Understanding tax obligations for Rreal estate agents
As a real estate professional, your tax return begins with an income statement from your employer. This statement includes all of your pay, wages, commissions, allowances, and bonuses for the financial year.
Once this income is reported, it serves as the basis for your tax return. Afterwards, the focus shifts to understanding which deductions you can claim.
Before we dive into what you can claim, it’s important to clarify the fundamentals of deductions. A tax deduction reduces your taxable income, meaning the more deductions you have, the less tax you pay.
To claim a deduction, the expense must be:
- Work-Related: The expense must be incurred directly in order to gain has been earned as income.
- Paid by You: The expense must be one that the taxpayer has borne, not reimbursed by the employer.
- Documented: Substantiation is needed in the form of receipts or invoices.
Key tax deductions real estate agents can claim
There are several types of deductions that real estate agents can claim. Below are some of the most common tax deductions available for real estate professionals.
1. Advertising costs
Advertising is an essential component in the life of a real estate agent. Well, if you spent money on advertising your property through forms like newspaper ads, online listings, flyers, or signage, you would probably get this cost deducted under taxes.
However, you absolutely don’t claim any advertising costs if you are on a salary and not earning commission since, for you, these costs are usually paid for by your employer.
2. Car expenses
Being a real estate agent, you will definitely have to drive around, whether for open homes, property inspections, or perhaps to meet a client. Expenses incurred from the use of a vehicle in undertaking these will be deductible. Fuel, tolls, park fees, and maintenance costs are some of them.
If you have calculated usage by keeping a record, you could claim from one of two methods: Cents Per Kilometre or Logbook. Penalties may be incurred with the games in this category.
Eligible Car Expenses:
- Travel between different office locations
- Going to open houses, client meetings, and property inspections
- Business travel, such as site visits and attending industry events.
3. Uniforms and laundry
You might be able to deduct amounts spent on the purchase, repair and maintenance of an employee uniform if wearing these types of clothing is made compulsory by your employer.
It includes branded shirts, jackets, or any work attire that makes you identifiable as a representative of the real estate agency. You can also claim laundry expenses incurred for cleaning your soiled garment provided your uniform is solely work-related.
4. Marketing equipment
Equipment such as a camera, a drone, or any other profession-specific equipment utilized with respect to property photography and/or marketing may be claimed as tax deductions.
If the equipment costs under $300 and is exclusively used for work, you can claim the full amount purchase price. If it costs over $300 you can only claim depreciation.
5. Self-Education and training
As a real estate agent, any training, courses, or conferences directly related to your career can be claimed as a deduction. This includes courses to obtain or maintain your real estate license, industry-related training, and conferences that improve your professional skills.
However, training that is not directly related to your current role, such as pursuing a law degree, cannot be claimed.
6. Gifts And client relations
If you purchase gifts for clients or suppliers as part of your work duties (for example, a hamper for a client closing a deal), these can be claimed as business expenses. Note that personal gifts, such as tickets to an event, cannot be claimed.
7. Home office expenses
For real estate agents who work from home, you can claim a portion of your home office expenses. This includes internet usage, phone bills, office furniture, and equipment depreciation. You can also claim electricity for lighting, heating, and cooling if they are used for work purposes.
8. Tax agent fees
If you use a tax agent to prepare and lodge your tax return, you can claim the fees charged by the tax agent as a deduction. Additionally, any travel expenses incurred to meet with the tax agent are also claimable.
What you cannot claim?
While there are many eligible deductions for real estate agents, there are certain expenses that are not deductible:
- Entertainment: Costs for social events, meals, or activities like concerts, sporting events, or recreational dinners with clients.
- Employer-Provided Tools: Tools such as laptops or cameras that are supplied by your employer cannot be claimed.
- Non-Work-Related Education: Any courses or training programs unrelated to your current role, such as pursuing a career in law, cannot be claimed.
- Business Suits and General Clothing: Even if worn exclusively for work, business attire such as suits or office clothing is not deductible.
Keeping records - essential for your deductions
To substantiate your deductions, it’s essential to keep accurate records. You don’t need to keep physical receipts; digital copies such as photos or scanned images of receipts are acceptable as long as they are legible.
Record-Keeping Requirements:
- Supplier Name
- Amount of the Expense
- Nature of Goods or Services
- Date the Expense Was Paid
- Document Date
Need help with your tax return?
Filing taxes as a real estate professional doesn’t have to be stressful. At KPG Taxation, our tax return accountants specialise in helping real estate agents navigate deductions and maximise their tax returns. Let us handle the complexities so you can focus on your business.
