The start of a new financial year means one thing to most people – tax time! If you’re an investor who rents out your property, it’s important you take the time to gather all your records, expenses and paper work in preparation for doing your tax return.

Keep a good record

Being diligent with keeping records from when you first purchase the investment will make this time of year less daunting and your property manager can assist by providing financial year statements detailing all transactions relating to your property throughout the period.

You’ll need proof of all your expenses so you can claim everything you’re entitled to. If, throughout the year, you’ve carried out any maintenance or made any improvements to the property such as painting or updating the bathroom, you’ll need to provide evidence.

It’s vital that records are kept for a minimum of five years and, in some cases, for at least five years after the property is sold.

Rent payments

In your tax return you must include the full amount of rent and other rental-related income you receive, regardless of it being paid to you direct or to your property manager.

In addition to regular rent payments, rental income can include rental bond money you were entitled to retain, letting and booking fees you receive and any insurance claims that were paid.

Deductions

Come tax time, you’ll be looking to claim deductions for related expenses for the period the property has been rented out.

Deductions can be made on things like;

management and maintenance costs, which can be claimed immediately
borrowing expenses, depreciation and capital works spending, which are usually deducted over a number of years.

The important thing to remember is that the deductions can only be claimed if the property is being rented out or is genuinely available for rent. Being available to rent means the period that the property is advertised for rent and receiving widespread exposure to potential tenants.

Capital gains tax (CGT)

If you’ve sold your investment property or house in that past financial year, any capital gain made on the property will be subject to capital gains tax. In this case, you’ll need to refer to records of the date and costs of buying the property so you can work out any capital gain, or loss, when you sell it.

If you’re a current investor or if you’re thinking of investing you can find more information about property tax on the Australian Taxation Office website or from your registered tax agent.