Carolyn Parrella, executive manager of Terri Scheer Insurance and property investor, says landlords often come under scrutiny from the ATO when lodging tax returns and it is vital they complete returns accurately.
“Landlords should consult their accountants to confirm what can and cannot be claimed as a tax-deductible expense. This ensures all claims are legitimate and the tax return amount is maximised,” Ms Parrella said.
“Seeking advice from a tax specialist can help make this time of the year much easier for landlords.”
Ms Parrella offered these five tips for tax time:
“The net loss generated by negative gearing can be offset against other income to reduce the tax payable,” she said.
Ms Parrella added that landlords may be unaware interest can be claimed only when a property is available for rent.
“For example, if a property is lived in for half a year and leased as a holiday rental for the other half, you cannot claim the interest for the full 12 months.”
Landlord insurance premiums can usually be claimed as a tax deduction, but Ms Parrella said this is typically overlooked.
She urged landlords to check their insurance policy to ensure they have the appropriate coverage.
“A standard home and contents insurance policy won’t cover landlords for the specific risks associated with property investing,” Ms Parrella said.
Landlords may also forget to claim costs they are rightfully entitled to.
For example, apartment owners can claim body corporate fees on strata or community title properties; landlords who rent furnished property can claim rental income as a tax deduction; maintenance costs can be tax deductable and running costs such as council rates, land taxes, and water and sewerage charges can potentially be claimable.
Ms Parrella cautioned that landlords should check first with their accountant on what can and cannot be claimed before submitting their claim.
She noted that self-managing landlords might be able to claim the costs of working from home.
“If you’re a self-managed landlord, you may be able to claim some of the costs of your home office. You won’t be able to claim all the costs, such as purchasing the computer and the monthly internet bills. However, a fair and reasonable part of this may be deductible.”
Property managers can be useful for landlords and their cost can be a deductible expense, according to Ms Parrella.
“Appointing a property manager might create a potential tax benefit while assisting with organisation and saving time for landlords,” she said.
“A good property manager will take care of the administrative responsibilities involved in an investment property. They should also be able to help reduce the burden at tax time by compiling and completing the relevant paperwork for ATO reporting.”