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Preparing for EOFY

By Rachel Wallace

The end of the financial year is fast approaching. And for property investors, this means getting organised: assessing their investment performance and preparing their receipts for the lodgement of their tax return.

So how can we help ease the pressure at EOFY time? We want to help our landlords with a process that we understand and undertake every year.

We understand the focus of every landlord is to optimise their tax returns and maximise their income, however, it is important to be aware of when and how they can claim repairs as a legitimate tax deduction.

We always advise landlords to seek tax advice from their accountant/tax agent.

When completing a tax return the landlord will need to keep records of the rental income they receive and the expenses of the managing agent or the expenses they pay directly.  We will supply an end-of-financial year statement which will collate all the information for the landlord. This will assist the landlord’s accountant when completing their tax return.

It’s a great idea to keep up to date with the latest guidelines from the ATO with regards to possible tax deductions and tax offsets. Some of the information listed is included below:

When the ATO refers to “maintenance” their definition is:

  • Work to prevent deterioration or repair existing deterioration. For example; repair of a leaking tap or replacement of a hinge to a kitchen cupboard door.

A claim for a deduction of the costs you pay to repair and maintain the rental property can be made in the financial year the works are paid for, however, you cannot claim the total costs if they did not relate directly to wear and tear or other damage that occurred due to renting out the property.

These then become capital expenses that may be claimed over several years as capital works deductions or deductions for a decline in value. 

When the ATO refers to “improvement” their definition relates to:

  • Providing something new
  • Generally furthers the income-producing ability or expected life of the property
  • Generally changes the character of the item you have improved
  • Goes beyond just restoring the efficient functioning of the property
  • A claim for a deduction for the total cost of improvements to the rental property cannot be claimed in the year you incurred them however, parts of the work may be able to be claimed – such as repairing an existing light, the remaining of the costs will also fall under capital expenses and can be claimed over some time.

Across the network, we are seeing an influx of 2022 smoke alarm upgrade work orders, do you know if you need yours upgraded? Another reminder to our landlords is that work approved after June 15 may not be completed and or invoiced in time for EOFY.

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