Tax Time: Rental property

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Property investors claimed almost $25 billion in rental deductions last year, making an average claim of about $19,250 each.

Of the 1.3 million people who lodged a rental claim, 150,000 were newcomers making their first tax return since becoming a property investor.

According to the ATO, its hit rate for follow-ups to first-time property investors is about 75 per cent -- so check your letterbox.

The biggest area for mistakes is between what can be claimed immediately and what has to be depreciated over many years.

Immediate expense claims include:
  • Interest on a loan
  • Repairs from new damage
  • Maintenance of existing services and appliances

Expenses that must be claimed over several years include:

  • Any damage that existed at purchase
  • Renovations and improvements
  • Replacement of any fixture or appliance

"One of the biggest mistakes people make is when they use a line of credit to buy a property and then draw on it further to buy a car or a holiday," H&R Block regional director Frank Brass said. "Then they go and claim the total interest against their property investment."

Expenses that can never be claimed include:

  • Interest on a loan for property not genuinely for rent
  • Travel expenses to the property when it is a personal trip
  • Stamp duty on property transfer
Click here to read about The common mistakes made when preparing a tax depreciation and for tips on maximising your depreciation allowances!
Source: Herald Sun

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