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According to the ATO, there are a number of common mistakes property investors make when it comes to claiming expenses for investment properties. Take a look at the list below to ensure you claim exactly what you are entitled to.

           

The end of financial year is a busy time for property investors to review their investment and put together their receipts ready to lodge tax returns.            

Take a look at the list below and seek legal and financial advice from qualified professionals, to ensure you claim exactly what you are entitled to.

Accountant

Mistake: Using an accountant who doesn't understand property.

Choosing an accountant who is experienced in property will be invaluable, particularly around tax time. They will be up to date with the laws surrounding property and can give you a better insight into what you can and can't claim. Before choosing an accountant, take the time to find out what their experience and level of expertise is. One of the best ways to do this is to ask different accountants questions about property investing. Do they answer the questions thoroughly? And more importantly, are they relatable and can you understand them?

Interest

Mistake: Claim interest relating to funds used for private purposes

It is important to keep your investment borrowings separate from funds used for other purposes, so that when you are claiming interest it is clear that it relates exclusively to the investment property. Have a completely separate loan for your investment property and if some of the funds are obtained from a loan on your owner occupied home, make sure it is separated into a separate loan or split with its own bank statements. Loans from State Custodians allow you to have up to 6 separate portions for this reason.

Legal expenses

Mistake: Claim conveyancing costs

Conveyancing expenses that you incur during the purchase and selling process are usually not deductible. Instead, these costs make up part of the cost based for capital gains tax purposes.

Travel expenses

Mistake: Claim travel costs for visiting a property, when it’s not the main purpose of the trip.

Property investors may decide to take a trip for a holiday or another personal activity and stop in to inspect the property on the way through and then claim the cost of the travel. Care needs to be taken when claiming that any travel claimed is directly related to the property.

Allocation of rental expenses

Mistake: Claim expenses for private use of the property

If you have an investment property but also use it for personal use (e.g. a holiday home or have friends/family living in the property for free), you are not able to claim expenses during that period.

Records you should keep

Whether you prepare your tax return yourself or use a tax agent, you need to keep a record of the following:

• Rental income and deductible expenses: Need to be kept for five years from 31 October or five years from when the tax return is lodged after 31 October.

• Documents relating to ownership of the property including all purchasing and selling costs: These documents need to be kept for five years from the date you sell your investment.

By keeping all of these documents handy, it will be a lot easier to make accurate calculations and ensure you remain within the right side of the law.

If you have an investment property loan and are reviewing whether you are getting the best deal, check out the State Custodians' range of home loans.

Our Lending Specialists are also on hand to chat to you about your options, so don’t hesitate to give them a call on 13 72 62 or leave your details here and they will call you.