The past year has raised new tax
issues for mum and dad property investors, with many, expected to cop a hit this
tax time.
Over 2 million Aussies invest in
property, but this tax time, many of them are facing unforeseen hurdles as a
direct result of rental moratoriums, borders closures and COVID restrictions.
In a tax time warning to all
property investors, CPA Australia cautioned of the ATO’s increasing access to new property data this income year, including property management and
updated rental bond data covering millions of individuals.
"The ATO can see around corners
when it comes to undeclared investment property income and capital gains,” said
CPA’s senior manager of tax policy, Elinor Kasapidis.
"It’s perfectly understandable
that COVID may have changed your investment property deductions and expenses,
just make sure you have the records to back up your claims,” she said.
Key elements landlords are being
advised to pay close attention to include insurance payouts and repayment
holidays. Other circumstances which may affect a taxpayer’s claim are changes
to property management fees and advertising during COVID.
Unfortunately, according to Ms
Kasapidis, lost rental income can’t be claimed as a tax deduction and must be
copped on the chin.
The good news, however, is "if
you reduced the rent to enable your tenants to stay in the property, this
doesn’t reduce your deductions for rental property expenses”, she explained.
These may include interest on
investment loans, land tax, council and water rates, body corporate charges,
repairs and maintenance and agents’ commissions.
Landlords may also be entitled
to claim depreciation for the declining value of assets such as stoves, carpets
and hot-water systems.
The fortunate few landlords that
did receive back payments or insurance payouts for lost rent are being reminded
to report these in their tax return.
Moreover, property investors
that experienced financial difficulty making their mortgage payments and took
up their bank’s offer of a repayment, holiday are being reminded that they can
deduct any interest paid on these deferred payments.
Recognising that some landlords
stayed at their rental property or took it off the market during lockdowns, Ms
Kasapidis explained that they’ll need to adjust their expenses and depreciation
claims for the period it wasn’t available for rent.
"Make sure you can show how the
split between private and commercial use has been calculated,” she said.
"Some taxpayers have purchased
their first or subsequent investment properties in the property gold rush since
COVID-restrictions eased. Now is the best time to talk with a tax agent about
maximising your tax deductions next year,” Ms. Kasapidis added.
Recent changes to tax rules
Adding to COVID-induced tax
uncertainty, there’s still some confusion about changes to the tax rules for
investment properties in recent years.
"Landlords can no longer claim
travel deductions relating to inspecting, maintaining or collecting rent from
their investment property,” Ms Kasapidis said.
"For properties acquired from 9
May 2017, landlords can no longer depreciate assets that were in the property
at the time of purchase,” she noted.
She reminded that from July
2019, many investors can no longer claim deductions for vacant land, including
while constructing or substantially renovating residential premises.
Australian taxpayers must also
report foreign property investments in their Australian tax return.
"The ATO has information
exchange agreements in place with foreign tax agencies. So, they’re receiving
data on your overseas investments and income too.”
"The property market is also
running red hot in other countries. If you sold property overseas, it’s likely
you made a reportable capital gain.”
Article Source: https://www.smartpropertyinvestment.com.au
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Jason Gwerder
Wednesday, 30 June 2021
