Tip #28 – Property Tax Deductions

Every year around now The Australian Taxation Office (ATO) releases a statement suggesting they are monitoring property investors and the deductions they claim.

From my experience the ATO tends to target the following areas:

  1. Whether property investors are claiming repairs and maintenance correctly. For example are they instant deductions or should the costs be spread out over time? This is a complex area and you should always check with your accountant before claiming repairs as an outright deduction.
  2. Are the deductions being claimed for an income – producing asset? For instance, if you make a repair to an oven whilst living in the property, then moved out 2 months later, you can’t claim that as a repair!
  3. Are property investors claiming the correct building allowance and depreciation deductions? This is the most common area of concern in my opinion, and some of the obvious mistakes I have seen include:
    • Claiming the building depreciation allowance based on the purchase price NOT the original construction cost.
    • Incorrectly classifying items of plant and equipment when they should be part of the building.

Be safe this financial year – get a Quantity Surveyor like Washington Brown to prepare a depreciation report for you and hand that report to a qualified accountant.