Year End Tips for Property Owners

Renovations by previous owner

You may be eligible for a deduction for depreciation on the cost of improvement by a previous owner, provided items are identifiable and itemised in a depreciation schedule.

Correctly disclose capital gains

The ATO is closely monitoring undisclosed capital gains including gains from disposing of assets to invest in superannuation. Ensure any capital gains on the sale of property are correctly recorded.

Prepare an accurate depreciation schedule

Having a depreciation schedule prepared by a qualified quantity surveyor may help add a significant tax deduction for depreciation. The cost is also tax deductible and helps substantiate any capital allowance claim you may have.

Property data matching

The ATO is using new data matching techniques, including monitoring property transaction details to target property investors ensuring the correct amount of tax is paid.

Interest repayments

If allowed by your lender, this is a strategy to defer the payment of tax. Factors such as anticipated future income, interest rates and cash flow impact should be considered fully beforehand.

Repairs at time of purchase

Expenses for repairs to property are generally deductible provided that they relate to wear and tear or other damage as a result of earning rental income. The cost of initial repairs at the time of purchase are not deductible.

Capital gains tax concessions

If you have renovated a property with the view to selling it at a profit in the short term, you may find yourself taxed as a ‘profit making scheme’. This means you will not be able to take advantage of CGT concessions.

Personal expenses

Ensure that any claims or interest on borrowings for investments can be clearly separated from interest on borrowings of a personal nature.