Is this the first year you need to declare a rental property in your tax return?

Do you know what income to declare, expenses you can claim and records you need to keep? Below is a summary of information you will need to help you prepare your 2016 tax return.

Assessable Income

You must declare your share of all rental-related income that you receive, whether it is paid to you or your agent. Generally, if the property is rented as a residential premise, the income is input taxed and you will need to record the gross amount in your tax return. The types of income you need to declare include the following:
• Gross Rent
• Reimbursements such as water consumption, legal fees and repairs & maintenance
• Compensation for lost rent such as bond money

Rental deductions

Ongoing maintenance costs directly related to your rental property earning income are generally deductible. These include some of the following:
• Advertising such as expenses to obtain a new tenant
• Bank Fees – some expenses are immediately deductible if under $300
• Capital works & Depreciation – if your investment property was built after 1985 it may be beneficial to obtain a depreciation report. Optima clients can obtain a $50 discount through Deppro (call Optima for more information).
• Insurance
• Inspection Fees
• Interest on your loan
• Property agent costs
• Rates, strata fees & land tax
• Repairs & maintenance such as gardening, lawn mowing, pest control & cleaning. Expenses that directly relate to the wear & tear in which you need to replace and/or renew broken and old parts may be immediately deductible. Expenses which improve the property’s condition such as renovations, replacing entire structures and initial repairs will need to be capitalised.
• Telephone, stationery & postage
• Travelling expenses such as travel to inspect, maintain and collect rental income.
Some of the expenses above may need to be apportioned, amortised, capitalised and depreciated.

Records to Keep

Generally, you should keep records of all income & expenses relating to your rental property. These include bank statements, property agent reports, tax invoices, tenant lease agreements etc. You will need to keep these records for five years from the date you lodge your tax return.  Our handy Rental Property Schedule will help you collate the information you need when filing your income tax return.

For more information you can refer to ATO’s guide Rental properties 2016 or Call Optima Partners on 08 62672200 today to provide you tailored advice & help you prepare your 2016 tax return.

Andrea Allen

Accountant – OPTIMA PARTNER