BMT Tax Depreciation provides valuable insights on eligible deductions for investors and offers guidance on effectively preparing for the upcoming financial year.
The Australian Taxation Office (ATO) is intensifying its efforts to combat improper deductions claimed by landlords. During the 2019-20 financial year, the ATO attributed $1.3 billion of a $9 billion revenue shortfall to erroneous reporting from investment property owners, primarily due to inaccuracies in claiming expenses and rental income.
To prevent such inaccuracies in claiming deductions, BMT Tax Depreciation provides valuable insights on eligible deductions for investors and offers guidance on effectively preparing for the upcoming financial year.
Keep records
The first step in preparing your investment property for the new financial year is to keep detailed records of all income and expenses associated with the property. Records should include rental income, mortgage payments, council and land taxes, insurance, costs of repairs and maintenance, and any other expenses related to the property.
Keeping records supports claims and will help you and your accountant prepare for the new financial year.
Know which deductions you can claim
There are several deductions available to investment property owners which can improve an investor’s cash flow significantly come tax time. Knowing the deductions you’re eligible to claim will help in preparing for the new financial year.
The table below outlines the deductions available to property investors if the expense is incurred.
It's important to note that investors can only deduct expenses that are directly related to their investment property.
Go through an accountant
While investors can attempt to prepare their own tax returns, the process can be quite complex. Therefore, it is often advisable to seek assistance from a qualified accountant. Accountants play a crucial role in helping investor navigate through intricate tax laws and ensuring that all eligible claims are maximised and accurately filed.
Investors who are lodging their tax return through an accountant must lodge the previous year’s return by 15 May.
Investors lodging their tax return through the ATO’s online MyTax portal, have until 31 October to lodge.
Prepay expenses
To claim costs in the same financial year, all expenses, including repairs and maintenance, interest, insurance, tax depreciation schedules, and ongoing expenses, must be paid before 30 June. Ensure that all expenses are prepaid before this date to be eligible for claiming them in the same year.
Maximise your tax return with depreciation
The ATO allows owners of income-producing properties to claim a tax deduction for the wear and tear of the property and its assets over time.
These deductions fall under two categories, capital works (division 43) and plant and equipment assets (Division 40). Capital works is a deduction claimable on the building’s structure and permanent assets. Plant and equipment depreciation is claimable on the easily removable or mechanical assets.
Investors wanting to maximise deductions and lower their taxable income should be claiming depreciation. Claiming depreciation allows investors to recoup a portion of the costs associated with owning and maintaining an investment property. Depreciation is the only non-cash deduction available to investors, meaning no money needs to be spent to claim it.
Ordering a tax depreciation schedule through a quantity surveyor who specialises in tax depreciation ensures deductions are maximised compliantly.
Quantity surveyors, such as BMT Tax Depreciation, are one of the few recognised professionals with the training to identify and accurately calculate construction costs. BMT conduct site inspections to ensure all deductions are identified correctly so investors can rest assured all claims are maximised and compliant with current ATO rulings and regulations.
To learn more about preparing for the new financial year with depreciation call BMT on 1300 728 726 or Request a Quote.
The information provided in this article is of general use only and should not be used as a quote or advice. BMT recommend consulting an accountant before making financial decisions. Contact BMT for a specialised tax depreciation schedule.
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