8 tax tips for property investors
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Find out how to prepare for tax time as a property investor

21 July 2022|4 minute read

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If you’re a real estate investor, the end of the financial year can be both a busy time and a great opportunity to make some tax savings.

In this article, we’ll share our tips for getting organised at tax time and remind you of some of the expenses you may be able to claim as tax deductions on your investment property.

How to get organised for tax time

1. Keep records of everything related to your property

One of the ways to get the most out of your tax return is to be exceptionally organised when it comes to keeping records of all property-related expenses and documents.

Hold onto receipts from property expenses, as well as documentation of damage and repairs.

If the Australian Taxation Office (ATO) audits your tax return and you are unable to provide evidence of your claims, you could be denied these deductions or even face penalties.

Consider keeping both physical and digital copies of receipts and other documents that can support your tax deduction claims. This will make it easier come tax time.

2. Consider getting a tax accountant

Time is money and doing your taxes yourself can be complicated, time consuming and stressful – even more so as a property investor.

A tax accountant can help ensure you are compliant with tax laws and help optimise your tax return and deductions.

Don’t just go with any old tax accountant – it’s a good idea to spend some time researching to find a reliable and trustworthy accountant. If you have friends who own investment properties, consider reaching out to them for potential recommendations.

3. Start thinking about the next financial year

As mentioned, being organised is important if you’re going to own rental properties.

Think about any renovation projects you intend to undertake on your investment property, as well as any repairs needed.

Getting repairs done before 30 June means that you can claim the costs as a deduction in the following tax return.

4. Apply for a PAYG withholding variation

Property investors often wait until the end of the financial year to claim things like expenses and the interest paid on their home loan as tax deductions. This means you’ll get your tax refund in a single lump sum, once per year.

While this isn’t necessarily a bad strategy, it can create cash flow problems for some investors.

Alternatively, you may be able to apply for a PAYG withholding variation with the ATO.1 This enables you to spread out the tax you pay throughout the year and receive tax deductions more frequently.

It’s a good idea to discuss a PAYG withholding variation with your financial advisor or accountant as they could help determine whether it’s a good move for you. They may be able to provide guidance on how much to adjust your PAYG so that you don’t end up having to reimburse the ATO during your tax return lodgement.

5. Get your capital gains tax right

House prices have reached record highs in many parts of Australia over the past year. If you have sold an investment property during the past financial year, you likely will be required to pay capital gains tax (CGT).

CGT is charged on the profit that investors make on the sale of an asset.

The CGT rate is usually the same as your income tax rate for that financial year. If you have held the investment property for over a year, you can apply for a 50% capital gains tax discount.

It’s important to record your capital gains correctly in your tax return to avoid facing penalties. CGT can also be charged on other investment capital gains e.g. shares and cryptocurrency.

Investors who have made a capital loss do not have to pay CGT.

What tax deductions can property investors claim?

Top deductions to remember for this end of financial year:

1. Negative gearing losses

A negatively geared property is one where the investor’s property expenses (e.g. mortgage repayments) outweigh their rental income. This results in losses and these losses are generally tax deductible.

So, if your rental property hasn’t generated as much income as you would have liked, you may be able to take advantage of some extra tax benefits.

2. Work from home expenses

While this point is less related to property investment, many investors may have worked from home over the last financial year.

The ATO’s website provides a comprehensive guide for how to claim working from home expenses.2

Remember that you can’t claim personal expenses like coffee and toilet paper. Doing so could land you in trouble should the ATO investigate your claims.

If you don’t know whether an expense can be claimed, speak to a reliable tax accountant or get in touch with the ATO.

3. Capital gains tax discount

If you’ve sold your investment property that you’ve held for over a year, you can apply for a 50% capital gains tax discount.

4. Home loan interest and fees

One of the biggest tax deductions property investors can claim is home loan interest.

The interest that you pay on your mortgage, as well as home loan fees (e.g. offset account fees or administrative fees) can be claimed.

However, if you’ve cashed out some of your equity to use for private purposes (e.g. to pay for a car) you won’t be able to claim interest on this portion of the loan.

5. Property maintenance and repairs

Most repairs and general maintenance can be claimed as tax deductions. Make sure that you aren’t claiming improvements as repairs or maintenance though.

For example, if you claim repairs you’ve made to a damaged fence, you’ll have to use the same materials as the original fence. If you used enhanced materials to repair the fence, this is likely considered to be an improvement.

6. Depreciation

Renovations and home improvements aren’t typically able to be claimed immediately, but you can generally claim depreciation or a capital works deduction in the future. This also applies to new appliances that you’ve installed.

7. Property management

Do you have a property manager taking care of the day to day running of your investment property? You can claim your property management fees in your tax return.

8. Others

Some other common tax deductions you may be eligible to claim include:

  • Strata or body corporate fees

  • Insurance premiums

  • Council and water rates that aren’t paid by the tenant

  • Costs of advertising to find tenants (e.g. property photography or money spent on property listing websites)

  • Real estate agent fees

  • Cleaning

  • Pest control

  • Stationery

  • Lenders Mortgage Insurance (LMI).

Tax can be an overwhelming topic for many property investors. This is why it’s a good idea to seek professional advice from a registered tax account and/or a financial adviser. The ATO have plenty of resources on their website as well, should you need further information.3

The end of the financial year can also be a good time to review your investment home loan. Book an appointment with your local Aussie Broker today to learn more about your mortgage options.

Book a chat with an Aussie Broker

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