Experts Offer Advice on How Real Estate Investors Can Maximize Their Tax Return Illawarra Mercury

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With the 2020/21 financial year now closed, owners will seek to maximize the tax return on their residential investment property and avoid any pitfalls. Whether you’re a long-time investor, new owner, or renting a property on short-term rental platforms like Airbnb, we’ve asked the experts for advice. This included details of certain circumstances resulting from the COVID-19 pandemic that may affect the tax result of residential rental properties. Matthew Clark, director of RAMS Home Loans Illawarra, said investors should make sure to claim all possible deductions, including interest. However, he said some homeowners may overlook areas such as depreciation, which could be claimed on appliances and fixtures in homes. Mr Clark said the Australian Taxation Office is increasingly focusing on claims relating to short-term rental accommodation / Airbnb-style properties. He said these can be more complicated than a long-term rental from a tax standpoint, so good record keeping was essential. “It can be difficult to put all your records together, and there may be additional costs that are not always factored in, such as cleaning, damage, repairs and replacement of sheets and towels”, a- he declared. “An accountant with knowledge of this area would be invaluable, as they will have the expertise to examine the type of expenses you will incur as you go. “There are also challenges when people don’t use Airbnb on their property all the time; there may be consequences if it is only a part-time investment property. “There are caps (on the number of nights a property can be rented) in some areas, and if you live there from time to time and Airbnb from time to time, you should be able to claim some of your interest and expenses, but maybe not all. ” Courtney West, a tax and business advisory partner at KPMG Wollongong, said income from short-term rental properties should be included in the owner’s tax return. “An individual can only claim a deduction for the part of the expenses related to an income-generating use, that is, when it is rented or available for rent – and not when it is used in a private capacity. “she said. “With COVID-19, the use of short-term rental properties has fluctuated and with lockdowns, landlords have had to deal with cancellations and reduced demand.” The ATO recognizes this and even when a landlord has made a business decision to stop or reduce advertising for the property for a while, they can still claim deductions. “Ms. West said that due to COVID-19, new circumstances have affected the tax result of residential rental properties.” This may affect the income you receive from the rental property. * If you collect rent arrears, you must report it as income. * Interest is deductible on your loan if it continues to accumulate because it is an expense you incurred, even if the bank defers repayments. * Instant asset write-off concessions do not apply to real estate investors who earn passive rental income. Ms West said that a potential opportunity for a tax deduction that rental property owners should investigate is whether they can claim certain construction costs, including extensions, alterations and structural improvements, in as deductions for capital works. “Capital works deductions are claimed over time, rather than in the year they were incurred,” she said. “If you don’t have this information for a property you’ve acquired, you can use the services of a qualified professional to estimate and report these costs for tax purposes.

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