10 Common Tax Mistakes Made by Property Investors

March 22, 2017 Sam Saggers

Property investing is a tried and true means of wealth building that delivers benefits to investors in terms of capital growth and tax reduction.

While we have no real control over investment property gains we do have control over what we claim on our taxes.

Unfortunately, many property investors either leave millions of dollars on the table that could have been used to grow their portfolios or they make erroneous deductions from a misunderstanding of tax law.

Are you making any of the 10 common tax mistakes?

1. Not claiming enough

You’d be surprised at just what the ATO allows you to claim.

Installed new smoke alarms or security systems lately? What about garbage bins?

Fixtures and fittings valued at less than $300 can be claimed within the first financial year.

Have you claimed everything you’re entitled to claim?

2. Believing your property is too old

Don’t automatically assume that your older investment property doesn’t have some depreciation in it left to claim.

While your investment property must have been built after 1987 to claim capital credits for structural elements (e.g. ceilings, floors, walls, etc.) it’s still possible to claim deductions for renovations completed after 1987, even if they were done by a prior owner.

Plant and equipment assets like hot water systems, stoves, carpets, etc. are deductible and should definitely be claimed.

3. Missing deductions after renovations

Items that have been scrapped after renovating as well as the items that are replaced can be deducted.

For example, if you discard tile and replace it with new tile or hardwood, the value of both the new and the old can be deducted.

 Missing deductions after renovations

4. Believing that once a return is lodged it’s gone

There’s a lot to consider when pulling together all of your tax information…it doesn’t hurt to have another look once you’ve filed.

If you’ve discovered that you missed claiming something, that doesn’t mean you’re out the claim as the ATO allows you to make adjustments to your two previous tax returns.

5. Claiming the purchase cost of the land in a construction investment

Improvements to the land, including structural improvements are deductible but not the cost of the land purchase itself.

6. Claiming costs where there were none

If you’re a DIY kind of person you probably do a lot of work yourself when you refurbish an investment property.

While you can save a lot of money this way, the fact is that your time and effort are not allowable deductions because you didn’t actually incur a cost.

Obviously the materials you purchased to complete the job are tax deductible, however your sweat equity is not.

DIY renovation

7. Interest mistakes

If you’ve taken out a home loan to buy both an investment property and a new car, you’re not allowed to claim a deduction for interest paid on the personal part of the loan.

As you can imagine, this scenario can send up a red flag for the ATO to audit, hence the reason it’s always smart to keep your investment property loans separate from your personal.

8. Travel expenses

While it is permissible to claim travel costs to visit your investment property(ies) it’s not possible to claim then in connection with a personal vacation.

In other words, only the costs incurred that are directly related to visiting your investment property are deductible.

Travel expenses

9. Allocation of rental expenses

If you rent out an investment property that you also use personally (e.g. a holiday home) you cannot claim rental expenses for the time that you are using it yourself.

10. Tax return preparation

Without question the tax structure can be complex. There are so many possible deductions, especially for property investors it’s not hard to miss one or more of them.

Why run the risk of losing out on potential gains that you can use towards your wealth building efforts? Enlist the services of a tax professional who is well versed in tax law surrounding investment property and preferably, who is an investor him or herself.



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