How property investors can avoid costing themselves thousands

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October 30 2020
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Ahead of the 31 October deadline for lodging tax returns, property investors are being warned to not leave thousands of dollars in the “Australian Taxation Office’s coffers” and take advantage of the deductions they are entitled to.

How property investors can avoid costing themselves thousands

On the eve of the tax deadline, the CEO of property investment company Custodian and author of 7 Steps to Wealth, John Fitzgerald, urged investors to take advantage of what they are able to claim.

“I’m continually surprised by the number of investment property owners who don’t even claim depreciation on their asset,” Mr Fitzgerald said.

“These deductions can be quite significant. I’m talking in the thousands of dollars, particularly when you buy a brand-new investment property.”

Mr Fitzgerald told investors who are new to the game that they can purchase a quantity surveyor for a few hundred dollars to prepare a depreciation schedule providing huge tax benefits to the investor.

“It’s a one-off cost,” Mr Fitzgerald said.

“A depreciation schedule generally lasts the lifetime of the asset and allows the owner to claim every year on the wear and tear of their property, which significantly reduces their taxable income.”

While the deductions for existing properties are not as significant, Mr Fitzgerald said there were still enough to make a depreciation schedule a worthwhile investment.

“That’s why property investment is such a great way to create wealth,” Mr Fitzgerald said.

“You can borrow money to buy an investment property and the interest costs can be tax deductible.

“Your property management costs and maintenance and repair costs are tax deductible and you can claim depreciation on the building.

“If you buy a property for $500,000, which after land is worth about $250,000, you could potentially achieve a tax deduction of about $10,000 a year.”

What can investors claim?

Mr Fitzgerald told investors the basics that they can and can’t claim this tax season.

New property:

Capital works (the building itself)
Fixtures and fittings (such as carpets, curtains, dishwasher and oven)

Existing property:

Fixtures and fittings (such as carpets, curtains, dishwasher and oven)

Expenses you can claim on an investment property:

Advertising for tenants, bank fees and charges including interest on loans, body corporate fees and charges
Council rates and land tax
Insurance, property agent’s fees and commissions, quantity surveyor’s fees and repairs and maintenance

Expenses you can’t claim:

Travel expenses to inspect a property before you buy it
Expenses for rental seminars about helping you find a rental property to invest in
Travel expenses to inspect the property (unless you are using the property in carrying on a business).

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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