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 Home    Top 5 Tax Tips For Landlords

The end of financial year is fast approaching, but it doesn’t have to be a painful process! Those tear-your-hair-out moments are avoidable. These 5 top tips will help keep you on track and ready for June 30th.


1. Get the basics right

Owning a rental property means the rental income you receive is taxable. However, many of the expenses you incur on your rental property are tax deductible. Tax deductions are expenses you incur in order to earn income. 

In broad terms, when the expenses on your property, including mortgage and interest, exceed your income from rent, your property is negatively geared. On the other hand, when income exceeds expenses, your property is positively geared. If you have a negatively geared property you’re able to deduct the loss against your other income. As a landlord, negative gearing has its benefits in that when you lodge your tax return, the resulting loss will often mean a higher tax refund. 

Recent statistics show over 1.9 Australians earned rental income, and around 1.3 million of these were negatively geared. 


2. Know what you can and can’t claim

The most significant expense on your rental property is undoubtedly your mortgage repayments. The interest charged on your mortgage is able to be claimed for tax purposes. In addition to this, typical expenses that are tax-deductible include: 

  • Land rates
  • Water rates
  • Advertisement fees
  • Insurance for building, contents and public liability
  • Pest control
  • Gardening and lawn mowing
  • Depreciation
  • Maintenance repairs 
  • Strata/body corporate fees
  • Cleaning
  • Legal expenses to eject a tenant for non-payment of rent.
  • Hiring a debt collector to collect rent arrears.

There are some common errors that landlords make when claiming expenses on tax. One of these relates to repairs and maintenance. It’s important to note the difference between repairs or maintenance, and improvements or renovations. Repairs to restore something that is broken, damaged or deteriorating are immediately deductible, whereas improvements or renovations come under the category of capital works, and these must be claimed over a number of years. 

Additionally, initial repairs for pre-existing damage to the property at the time it was purchased will also be a capital works deduction and claimed over a number of years. You’ll also need to carefully avoid claiming costs for repairs in the first 12 months of ownership. 

Another common mistake is when landlords claim the interest on a loan, but part of that loan money is directed to personal use. Remember, only the portion of the loan directed to the rental property is tax deductible.

Recent tax legislation changes also prevent landlords from claiming expenses incurred in travelling to residential rental properties, unless they are in the business of letting rental properties. 


3. Keep accurate records 

Keeping up to date and accurate records of all rental property-related expenses across the whole year will save you major headaches at tax time, as these records will help support your claims. Engaging an online record keeping platform will prove is a valuable tool for landlords, to help keep records and correspondence in order and make your tax refund as seamless as possible. 


4. COVID rental reductions?

The past year has seen landlords and tenants in unforeseen circumstances. If you’re a landlord whose rental income has been affected by the pandemic through rental reductions, or your tenants ceased payments altogether, it’s important to learn what this means when it comes to claiming tax deductions. Only the rent that has actually been paid needs to be declared. Any rent that may have been deferred until the next financial year won’t need to be included until you receive them. 

If you’re covered by rental insurance that has covered this loss of income, you will need to include these payouts as part of your taxable income. 

Many banks have also offered deferral of loan repayments for their mortgagees, however rental property owners will still be able to claim interest being charged on the loan even if the repayments are yet to be paid. 


5. Seek advice 

Lastly, it’s important to seek advice from your accountant to ensure that all your expenses are claimed correctly. Staying across all your taxes and the various laws and regulations can get overwhelming, so it pays to get professional advice on what can and can’t be claimed. 


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