What Melbourne property investors need to know this tax season

Did you receive a letter from the Australian Taxation Office (ATO) recently?

If so, count yourself among the two million property investors the Office contacted with a clear message: false claims – including illegible travel deductions – will not be overlooked in 2018.

As the end of financial year approaches, it’s important for Melbourne real estate investors to ensure they’re up-to-date with recent legislation. Otherwise, you could find yourself in trouble with the ATO. Here’s what you need to know.

Heightened watch for Australian property investors

Last year, the federal budget introduced measures to minimise widespread manipulation of the taxation system by rental property owners. The primary goal was to crack down on false claims, including travel-related tax deductions and depreciation for second-hand items in properties. Holiday homes were also a major concern.

In a recent press release, Assistant Commissioner Kath Anderson makes the office’s stance clear: “While private use by family and friends of a holiday home is entirely legitimate, it does reduce your ability to earn income from the property. This, in turn, impacts the deductions you can claim.”

Anderson went on to explain that all regulations were a direct result of tax fraud by investors. In the eyes of the ATO, owning a rental property doesn’t mean you’re in the business of rental properties; therefore, you shouldn’t be entitled to such deductions either.

In their written correspondence, the ATO has warned all taxpayers with rental properties that they’ll be using  “sophisticated systems and analytics” to spot false claims.

“Incorrect rental property claims, will not go unnoticed,” says Anderson.

Essential tax prep for Melbourne landlords

Landlords can still make claims for various rental property expenses, such as insurance, maintenance, and pest control. It’s critical, however, that all costs were incurred when the property was rented or available for rent.

To get the most back at tax time – and stay on board with new legislation – familiarise yourself with what you can and cannot claim. Understand what’s eligible for a deduction and what may depreciate over a period of time.

On top of that, stay organised. You’ll save time and money by filing correctly the first time. Avoid shoebox accounting and work with an experienced property manager instead. A dedicated property manager can provide year-round support and ensure you have all necessary receipts and records when it’s time to file.

For help looking after your property portfolio, contact the team at Nelson Alexander or drop into one of our offices. We have over 46 years experience helping Melbourne investors run their portfolio like a successful business.