This year the ATO plans to contact over 100,000 rental property owners about their claims.
Here are some tips to avoid a follow-up from the ATO:
What can I claim straight away?
- Interest on a loan to:
- purchase a rental property or purchase land to build a rental property
- purchase a depreciating asset for the property, such as an air conditioner
- finance renovations like a deck
- make maintenance repairs or repair damage to the property
- repairs to part of the guttering or windows damaged in a storm
- maintaining plumbing, repairing electrical appliances or machinery
- the cost of preparing a lease agreement with your tenant, and
- costs associated with evicting a tenant.
What can I claim over a number of years?
You can claim other expenses over a number of years, including the cost of depreciating assets, structural improvements and most borrowing costs. Assets that are part of the property such as stoves, air conditioning and hot water systems can be claimed over a number of years as a 'decline in value' deduction.You can also claim a capital works deduction (normally over 25 years) for the building construction plus any subsequent improvements made by you or a previous owner.
Some other examples of expenses that need to be claimed over a number of years include:
- the total cost of 'improvements' to your rental property
- replacing something such as a complete fence or building, a stove, kitchen cupboards or a refrigerator, and
- borrowing costs such as stamp duty charged on a mortgage, loan establishment fees and title search fees charged by your lender.
If these amounts are less than $100 in total they can be deducted immediately, otherwise they are generally deductible over five years or over the term of the loan, whichever is less.
What cannot be claimed:
- deductions for rental properties not genuinely available for rent
- interest on a loan you use to buy a home that you do not use to produce income or from the time you start using the property for private purposes
- borrowing expenses or interest on the portion of the loan you use for private purposes like buying a new car
- travel expenses when the main purpose of the trip is a personal holiday.
- stamp duty charged by your state/territory government on the transfer of the property title or leasehold interest
- insurance premiums where under the policy your loan will be paid out in the event that you die, become disabled or unemployed, and
- solicitor fees for the purchase of the property and the preparation of loan documents.
If you need any assistance contact Alan Beck CA on 0419 671 602