When it comes to Australian tax returns, there are certain expenses related to investment property tax deductions. In this article, I’ll explain common tax deductions and the documents needed to claim them.
A general overview of common investment property tax deductions
- Rental Interest: If you have taken a loan to purchase an investment property, you may be able to claim the interest charged on that loan as a deduction.
- Property Management Fees: Agent/Management Fee if you use the services of a property management company
- Advertising Costs: Expenses incurred for advertising your rental property, such as newspaper ads or online listings
- Insurance: Premiums paid for insuring your rental property, including building and contents insurance
- Repairs and Maintenance: Costs associated with repairing and maintaining the rental property, such as fixing plumbing issues or repainting.
- Council Rates and Land Tax: These are local government charges imposed on the property
- Utilities: If it’s not paid by the tenant, you may be able to claim a portion of utility bills, such as electricity and water
Documents need to keep as proof for investment property tax deduction
To substantiate your investment property tax deduction in tax return, it’s important to maintain accurate records and relevant documents. Here are some documents you should consider keeping as proof of your investment property tax deduction:
- Rental Income Records: Such as rent receipts or statements from your property manager or tenants
- Expense Receipts: Retain receipts, invoices, or statements for all expenses related to your rental property. For example, receipts for repairs, maintenance, council rates, and etc…
- Loan Documents: If you have a loan, keep copies of those documents. For example, statements that reflect the interest charged on the loan.
- Utility Bills: Such as electricity bills or water bills, if you are claiming a portion of utility expenses.
- Insurance Policies: Retain copies of insurance policies for your rental property.
- Depreciation Schedules: If you are claiming depreciation on capital assets within the property.You keep a copy of the depreciation schedule, which is prepared by a qualified quantity surveyor, or relevant documentation related to the depreciation claim.
- Bank Statements: a bank statements to show rental income and expenses.
- Lease Agreement: Lease agreement or rental contract that outlines the terms and conditions of the tenancy.
- Correspondence: Retain any correspondence related to your investment property tax deductions, such as emails, letters, or notices exchanged with tenants, property managers, or relevant authorities.
It’s important to note that the ATO may require you to retain these records for a certain period of time, typically five to seven years, so it’s advisable to keep them organized and easily accessible.