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Top 10 tips for rental property owners by ATO


The ATO has published top 10 tips for rental property owners to help them avoiding common mistakes. Learn more to save your time and money.

1. Keep the record of income and expenses

It’s necessary for your client to keep the evidence of the income and expenses so that they are able to claim everything they are entitled to. The records should be kept during the time they own the property until five years after they sell it.

2. Advertise your property to make it authentically available for rent

To claim a tax deduction it’s required that your client’s property is genuinely available for rent. To proof a real intention to rent the property it should be advertised with reasonable rental conditions.

3. Learn the difference between initial repairs and immediate deduction

Your client is not able to include initial repairs or capital improvements into immediate deduction.

  • Immediately deductible repairs relate to damages that happened as a result of renting out the property, it means initial repairs can not be included. However, these costs can be used to profit property when it’s being sold.
  • Ongoing repairs that happened while renting out the property can be claimed in the same income year the expense been incurred.
  • Renovations are classified as improvements and are not immediately deductible.
  • Replacing damaged item that costs over $300 must be depreciated over several years.

4. Claim borrowing expenses

Depending on the costs of borrowing expenses whether they are over $100 - deduction is splitted into five years or less the $100 - the full amount can be claimed in the same income year the expense incurred.

5. Claim purchase expenses

The deductions for the costs of buying the property can’t be claimed by your client. Conveyancing fees and stamp duty costs are used when working out whether your client need to pay capital gains tax.

6. Claim the interest as a deduction

If your client takes out a loan for the rental property, they can claim the interest as a deduction. However, only the interest related to the rental property, not personal use can be claimed.

7. Get capital works deduction

Some building costs can be claimed as capital works deductions at 2.5% of the construction costs for 40 years since construction was completed. The informations about previous capital works can be claimed by previous owner or be estimated by professional. (?) “This one is complicated, please double check it”

8. Claiming the right portion of client’s expenses (the same)

In case when property is rented out to family or friend with a rate below market, a deduction can only be claimed for that period up to the amount of rent received.

9. Co-owning a property

Co-owning a property requires to declare rental income and expenses and legal interest will be shared equally.

10. Capital gain vs. capital loss

When selling rental property there is a chance for a capital gain or a capital loss. In case of capital gain, it must to be included in the tax return for that financial year. In case of loss it can be deducted from capital gains over the next years.

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