With the 2018/2019 financial year now over, it‘s necessary to ensure that you are claiming the correct returns before the tax window closes on 7th July. Any expenses that you claim must only relate to the costs that you incur when generating the rental income and not include any private expenses.
Any fees or commission that you pay to your Harcourts property manager can be claimed. This includes your management fees and any letting fees. When it comes to tax and what you can and can’t claim, it’s recommended that you seek the appropriate expert advice. For general information on what you can claim, please follow the guide below.
Costs that you can claim:
Insurance and Rates Interest
Ensure that you are only claiming the interest charged on money you have borrowed to purchase your rental property. This must not include interest from any other borrowing unrelated to your rental property.
Fees can include charges for managing your accounts, filing of tax returns and most costs relating to advice.
Repairs & Maintenance
Landlords can claim costs for any repairs or maintenance however they cannot claim for their own time if they do the work themselves. In this case, only the materials can be claimed.
You will need to establish what’s a repair and what’s an improvement as you can’t claim an improvement as an expense.
It is advisable to seek advice from a tax agent for anything that you are unsure of.
Note that if you have insulated your home to meet the new legislation and there was no existing insulation, you cannot claim this as an expense as it will be deemed as a property improvement. If you had to replace old insulation due to deterioration, this may be an expense, however upgrading insulation is still seen as an improvement, so it may be necessary to get professional advice from a tax agent if you are doing both a replacement and an upgrade at the same time.
Motor Vehicle Expenses
You can claim for costs travelling to inspect your property and there are two options for this. Speak to your accountant on whether you should claim by the kilometre or claim a percentage of the total running costs of your vehicle and depreciation.
You can claim a deduction for the legal expenses when buying a rental property if any legal fees are $10,000 or less in one year. You may also be able to claim legal fees incurred when selling a rental property.
Depreciation can be claimed to cover costs of wear and tear and general aging of furniture and fittings but cannot be claimed on the rental property’s land or buildings. We recommend speaking to a tax agent as this can be complex.
If you have your property managed by a Harcourts Property Manager, you will have already received an annual summary detailing all income and expenses for the 2018/2019 financial year. This will assist your accountant with the filing of any tax returns and claiming of costs.