Property and Tax...

Hi Property Lovers

Property and tax...... the two come hand in hand! And being around tax time i have had several enquiries from people regarding their property and what tax they can claim. I came across this article this morning which gives a lot of great information on this subject.

Australians love property! Not only do we have one of the highest home ownership rates in the world but we also have one of the highest investment rates in the world.

Last year, more than 1.4 million people claimed rental deductions against their tax returns, and 200,000 first time property investors are expected to swell that number to 1.6 million this year.

While negative gearing, claiming your losses and cutting your costs are all allowed under our tax system, there are still a high number of mistakes made every year when it comes to property returns.

The Australian Taxation Office says more than $25 billion was claimed in deductions on rental properties last year, making real estate one of the largest sources of claims.

Frank Brass, a director of tax company H&R Block, says one of the biggest expenses and often the area where the most mistakes are made is claiming interest paid on borrowings.
"If you use some of the money for private expenses, then the interest amount has to be worked out pro-rata - a very expensive process to get your tax agent to do," he says.
"The goal is to have a separate loan for the investment property so that all the interest on that loan is deductible."

But property shouldn't just be about negative gearing - people need to make a positive income from their investment.

"Some people do invest in property just as a tax strategy, particularly in the bubble of the past four or five years," he says.

"However, I like to remind people they should never be afraid of paying $1 million tax because it would mean they've earned $2 million."

Chris Gray, chief executive of property consultancy Empire, says tax time is a good trigger to review your property's performance and the best time to review your accountant's performance.

Gray says many people inherit their accountant through family or friends. "Now is a good time to review your accountant. Good accountants that understand property investing will more than pay for their costs," Gray says. "Take a depreciation schedule, for example, many accountants would not even think to tell their clients to have one drawn up, at about $550 or so, it can pretty much guarantee your first deduction will be more than the cost of the report."

What you can't claim

• Interest on any portion of a loan used for private purposes.
• Rental properties not genuinely available for rent.
• Travel expenses when the main purpose is a holiday.
• Solicitor fees for the purchase of property and for loan documents.
• Stamp duty on the transfer of a property title.

All information was gathered from: http://www.news.com.au/business/money/story/0,28323,25806877-5013951,00.html

If you have any further questions regarding property and tax, please don't hesitate to contact me.

Thinking of buying or selling in Nedlands? Call me anytime.