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Investment property owners are being urged to ensure they keep property accounting records and plan ahead for next year’s tax return.
Chief executive of First National Real Estate Ray Ellis said the recent targeting of property investors by the Australian Taxation Office (ATO) caught many investors unaware and came too late for them to address any concerns the office had in the last financial year’s return.
“The ATO wrote to more than 110,000 rental property owners towards the end of the 2012/2013 financial year, offering advice on what their entitlements and obligations were. But if they had failed to keep the appropriate records and accounts, there was little they could do at that point," he said.
“It is important they receive this advice now, at the beginning of the financial year, so they fully understand what they need to capitalise on in terms of their investment and maximising their returns.”
According to tax depreciation expert Mr Bradley Beer from BMT Tax Depreciation, 80 per cent of property investors failed to take full advantage of the tax benefits of owning an investment property.
“Many investors don’t realise that regardless of whether they have spent any money on their property, the wear and tear on their asset and its fixtures can be offset against any income they earn from the property,” he said.
“Property depreciation is a non-cash deduction available to income-producing properties and can be claimed on both positively geared and negatively geared properties.”
Tax benefits associated with negative gearing could sometimes be equivalent to 60 per cent of the total purchase price of a property.
Other costs that the ATO allow to be deducted includ interest costs, maintenance expenses and holding costs such as building insurance and rates.
Mr Ellis said establishing a depreciation schedule from the outset ensures all expenses and items are deducted to their full capacity.
“Investors always look for the greatest return on their investment, and the best place to start is by securing the services and advice of a professional,” Mr Ellis said.
“The constantly changing ATO rules make it essential for investors to use competent depreciation companies, like BMT, to undertake an onsite inspection of their property. Desktop estimates will no longer suffice.”
