Rental Property Tax : Changes in 2016
To get the best outcome from your rental property tax return there are many issues that need to be addressed. These may affect your profits and tax returns.
For additional information as to how these rental property tax changes affect you, please fee free to call me on (02) 4360 2836 or 0438 177 811.
Depreciation Claims- Rental Property.
To claim building depreciation in your rental property tax return there has always been a requirement that there must be either a builder’s report, in the case of a fairly new building, or a quantity surveyor’s report for older buildings. The cost of the quantity surveyor’s report is tax deductible. It should be stressed that these reports enable substantial claims for building depreciation claims and also for plant and equipment depreciation claims. We urge all our clients to make this a top priority when they purchase a rental property.
Depreciation can be claimed using either the cost price method or the diminishing value method. The quantity surveyor’s report figures are a good guide as to which method is the most effective.
Other Tax Deductions.
All deductions for rental properties must be substantiated if there is a Tax Office audit. It is therefore vital that all receipts and invoices be kept for five and a half years. Particular care should be taken with claims for maintenance and repairs deductions. Basic claims for necessary repairs are allowable deductions but claims for capital improvements such as new bathrooms and kitchens cannot be claimed as a straight deduction. Capital improvements have to be claimed as depreciation items over a number of years.
Frequently Overlooked Tax Deductions.
Other deductions that are often overlooked include claims for travel and accommodation. If the investment property is interstate or a long distance from the taxpayer’s home, travel and accommodation expenses can be claimed as long as the expenses can be proven as ‘necessarily incurred’ in gaining or producing the rental income.
The Tax Office has announced that they will be scrutinizing rental property returns in 2016.
Please be aware the Australian Tax Office will be looking closely for claims for bank interest.
Claims for repairs will also be targeted. It is important that claims are only made for repairs and not capital expenditure for improvements such as new bathrooms and new kitchens. If claims are made for building depreciation and depreciation of plant and equipment it is essential to have either a detailed builder’s report or a quantity surveyor’s report.
Here at Tax Returns Central Coast we specialize in rental property returns. For the past ten years our focus has been on achieving the best tax outcomes within the law.
The Australian Tax Office provides further information on rental property expenses and it may be accessed here.
Should you have any questions regarding the Tax Office changes please call us on 4360 2836(b) or 0438 177 811(m)