Don’t fall foul of the taxman

If you're an investor in rental property, take a note of these common problem areas the ATO finds with deduction claims. Legal fees are only deductible if they're associated with taking out a loan to buy property – not for the actual purchase. These fees can be claimed along with other borrowing costs but not in the year of purchase. They must be depreciated over the life of the loan. Another deduction scrutinised by the Tax Office is depreciation, relatively easy to calculate for new properties but harder for established homes. Investors may try to determine these on their own but can pay a quantity surveyor to do it. This usually costs at least $500 but often results in a higher depreciation claim. The other area targeted in ATO audits is travel expenses associated with rental properties. Travel claims are allowed for the investor to do repairs, collect rent or carry out inspections. The property does not have to be interstate. A yearly per-kilometre claim can be made no matter where the property is.

Advertisement