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The end of financial year is a great time for property investors as they have the chance to claim back a portion of their investment expenses.

The end of financial year is a great time for property investors as they have the chance to claim back a portion of their investment expenses.

However, according to the Australian Taxation Office, there are a number of common mistakes property investors make when it comes to claiming tax. Before filling out your tax return, take a look at the list below and seek legal and financial advice from qualified professionals, to ensure you only claim what you are entitled to.

Construction costs

Mistake: Claim the purchase cost of the land as part of the construction cost for the property.
There are certain types of construction costs that you can claim such as extensions and structural improvements, but the land is not a part of this.

Mistake: Claim construction costs as a depreciating asset.
Depreciating assets in a rental property may include curtains, carpets, hot water systems and stoves and deductions can be claimed for these. However, construction costs do not fit into this category.


Mistake: Claim interest on the private portion of a home loan
If you have multiple portions with your home loan that have both personal and investing purposes (for example, if you take out a home loan to buy an investment property and a car), you are not able to claim interest on the personal portion.

Legal expenses

Mistake: Claim conveyancing costs
Any conveyancing expenses that you incur during the purchase and selling process cannot be deducted. 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. However, investors are only able to claim any travel that 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.