Maximising Your Rental Property Deductions
Investing in rental properties can be a lucrative venture, but it comes with the critical task of managing your expenses for tax purposes. At Strategem Financial Services, we are committed to ensuring that our clients are fully equipped to navigate through the rental property expense claims process with ease and confidence.
Understanding Rental Expense Categories
There are three main categories for rental property expenses:
Immediate Deductions: These are expenses incurred in the income year that can be claimed immediately. Examples include interest on loans, council rates, repairs, and maintenance, as well as depreciating assets costing $300 or less.
Depreciable Deductions: Certain expenses can be claimed over several years, including borrowing expenses, capital works, and the depreciation of assets.
Non-deductible Expenses: Not all expenses can be claimed. These typically include personal expenses, capital expenses, and the purchase of second-hand depreciating assets after 9 May 2017.
Claiming the Right Amount
Accuracy is key when claiming rental property expenses. You'll need to determine the correct portion of expenses that relate to the income-producing use of your property.
your property is only genuinely available for rent for part of the year
you use your property for personal purposes for part of the year
you only use part of your property to earn rent
you rent your property at non-commercial rates (less than market rates)
you partially use your investment loan for personal purposes.
Factors affecting this include the property's availability for rent, personal use during the year, and the portion of the property used to earn rent. At Strategem, we guide our clients through this process to ensure you're claiming the appropriate amount.
Positive vs Negative Gearing
Understanding the concept of gearing is essential:
Positive Gearing: Occurs when the income from your rental property exceeds your deductible expenses, leading to a profit.
Negative Gearing: Happens when your deductible expenses outweigh the income, resulting in a loss, which could potentially be offset against other income streams.
Navigating Changes and Compliance
It’s important to stay up-to-date with the latest tax legislation changes that may impact the expenses you can claim. For example, deductions for vacant land have undergone changes, and when hiring contractors, ensuring they have an ABN is critical to maintaining your right to claim deductions. At Strategem, we stay current on these changes, ensuring our clients’ claims are compliant and maximised.
Did you know?
Verifying Supplier ABNs
It's vital to confirm that any contractor you engage for services and repairs on your rental property is in possession of a valid Australian Business Number (ABN). Should they fail to furnish you with their ABN, you're obligated to withhold 47% from their payment and remit this amount directly to us.
Failing to adhere to this withholding requirement when necessary could forfeit your eligibility to claim these payments as tax deductions.
Strategem's Assistance with Rental Expenses
Partnering with Strategem with your Taxation & Accounting means you have a team of experts dedicated to maximising your rental property deductions. We offer:
Tailored advice on immediate and depreciable deductions.
Strategic planning to optimise your rental property's profitability.
Assistance in navigating complex tax changes and requirements.
Guidance on record-keeping and substantiating your claims.
How to Get Started with Your Tax Return
When it’s time to lodge your tax return, we ensure that all rental expenses you can claim are accurately accounted for. The process involves:
Detailing rental property income.
Adding deductible expenses under the correct categories.
Apportioning income and expenses accurately in cases of co-ownership.
With the landscape of rental property investments constantly evolving, having a knowledgeable and experienced accountant is indispensable. At Strategem Financial Services, we not only understand the intricacies of rental expenses but also proactively develop strategies to ensure our clients can claim all available deductions.
Ready to enhance your rental property's financial performance?
Reach out to Strategem Financial Services today, and let us help you turn your investments into a success story.
We are here to assist you
For further advice on rental property expenses, please do not hesitate to contact our office on (03) 5445 4777, where our dedicated team will be available to provide you with expert support.
