With tax time just around the corner for both businesses and individuals, it’s not too late to start getting your affairs in order. Whether you are looking to purchase a home, have recently purchased or have an investment portfolio, it’s important to ensure you have all your paperwork ready to go.
There are several tax benefits available for owner-occupiers and also investment property owners, so it’s important to know what you could be entitled to. Of course, always confirm with your tax agent as they will be most aware of your situation and what’s available in the State your property is located in.
The key with tax deductions is to keep all of your receipts, bills and proof of purchase and records.
With the end of June so close, now is too late to expect to purchase and settle a residential or investment property this FY, but understanding more about your tax entitlements is important should you be in a position to settle a property in the future. The team at Lending Specialists can assist you with home loans and investment home loans, business and commercial loans, self-managed superannuation fund loans and vehicle and equipment finance. https://www.lendingspecialists.com.au/products/
Property owner deductions
If you are looking to purchase your first investment property, there are some major tax benefits to be aware of that you may be able to claim. For example, if the building is under 25 years old, investors can claim back the depreciation in value of the original cost of construction of the building for up to 40 years and for some this can offer substantial savings. Contact the ATO for more information or seek out a professional depreciation profession who can prepare a report on your property.
Working from home
Don’t forget that those working from home – particularly with COVID-19 – are entitled to claim benefits. If you have a dedicated home office, you may be able to deduct expenses such as home insurance, office equipment (depreciation), maintenance, mortgage payments, phone and internet and also your utilities such as gas/electricity.
If you don’t have a home office but also work from home, the opportunity to claim many of the above excepting mortgage payments, maintenance, insurances and some utilities may also be available.
If you have worked from home during COVID-19 or otherwise do some days from home but not all, there remains an option to claim certain expenses such as phone, equipment depreciation and internet and a portion of utilities based on how much you are working from home.
If you’re not working from home, owner-occupiers are not entitled to claim any tax deductions.
Again, contact your accountant, the ATO or registered tax accountant for more information about your specific circumstances.
COVID-19 work from home deductions
The Australian Government announced that those working from home during COVID-19 lockdowns (1 March to 30 June) were able to claim a rate of 80 cents per hour working from home, unless you are reimbursed by your employer. The alternative method is to calculate the portion of your expenses used for work from home. Speak to your tax agent for more information and to decide on what is best for your situation.
More information is available at the ATO’s website.
Residential rental property deductions
With rental properties generating income, this means that you can claim tax deductions, but not all costs can be claimed. Borrowing expenses you incur in taking out a loan for the purchase of your investment property such as the amount you borrowed for the property, interest, legal fees, inspection or sourcing fees and stamp duty. Some of these costs (and others) are considered private or capital expenses and may be claimed elsewhere.
Basically, expenses can only be claimed once the property is used for income generation. You can claim many things from pest control and servicing costs, gardening and maintenance, insurance, land tax and Council rates, cleaning and utilities, interest on loans, legal expenses and lease document expenses (with exceptions). Visit the ATO or ask your tax agent for the full list and to find out what suits your situation.
To find out more about how the team at Lending Specialists can assist you, contact us today. We have specialists in home loans and investment home loans, business and commercial loans, self-managed superannuation fund loans and vehicle and equipment finance. https://www.lendingspecialists.com.au/products/
The information in this article is of a general nature only and should not be relied on for tax advice. We always recommend you speak with your accountant or taxation adviser before making a decision relating to the purchase/administration of an investment property.