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Focus On Rental Property Income And Deductions This Tax Season

Claim Tax Deductions For Your Business Expenses

One of the four primary areas the Australian Taxation Office (ATO) is targeting this tax season is income and tax deductions from rental properties. Calculating rental tax is tricky as it requires extra caution for calculations and claims when lodging. The ATO Random Enquiry Program has recently discovered that nine out of ten tax returns that claimed rental income and deductions had at least one error or inaccuracy.

Therefore, the ATO is advising owners of rental properties to check their records thoroughly before filing income or claiming deductions. They can also seek assistance from registered tax agents having years of experience in lodging taxes.

What Experts Have To Say?

“Registered tax agents can only prepare tax reports with the information they obtain from their customers, and we are well aware that few clients won’t know everything they need to tell their agent,” assistant commissioner Tim Loh said.

The ATO wants the tax agents to be attentive enough to conduct thorough investigations and ask the right questions about the type of income reported and deductions made from their clients who want to file rental deductions.

By filing the tax and claim correctly the first time, any audits and penalties can be avoided. Here are some strategies that can be followed:

  • Include all rental income

When preparing tax returns, include all sorts of rental income, such as:

  1. Short-term rental arrangements
  2. Renting part of a home
  3. Rental insurance payouts
  4. Rental bond money retained
  • Get your expenses right

Some expenses can be claimed straight away and needs to be prepared with accuracy, such as:

  1. Rental management fees
  2. Council rates
  3. Repair costs
  4. Interest on loans
  5. Insurance premiums
  6. Borrowing expenses
  7. Capital works
  • Selling a rental property

When selling a rental property, make sure you consider and report:

  1. Capital Gains Tax
  2. Capital gains or capital losses
  3. Cost base calculation
  4. Stamp duty
  5. Legal fees
  6. Valuations
  7. Real estate sales fees
  8. Purchase and sale records

Maintain Proper & Accurate Records To Claim Deductions

According to the ATO, all sorts of rental income records and expenses must be preserved for atleast five years or longer from the filing deadline for tax returns and for five years following the asset’s sale.

Also, the records should show how the cost for the rental property was incurred and how much it contributed to earning rental income. A perfect record should have information, such as:

  1. date the expense was incurred
  2. name of the supplier
  3. cost of the expense
  4. description of the products or services, and
  5. date of the document

The ATO can ask for proof of any claim that you make anywhere and anytime, so good record keeping is the only way to ensure you can claim everything you are entitled to. For more information, schedule a consultation with our tax accountants at KPG Taxation.

Consulting with KPG Taxation

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