Recently the Australian Taxation Office sent around a bulletin busting 5 common tax myths.
Did you believe any of them?
Myth 1: Investors can claim travel expenses to visit their residential investment property.
Since 1 July 2017, investors can’t claim travel expenses to check on their residential investment property.
This includes long and short-term rentals, along with holiday homes.
Myth 2: Replacing like-for-like is always a repair or maintenance.
This comes down to ‘what’ is being replaced.
If it’s a depreciating asset, like a cooktop or pool pump, it must be claimed over each asset’s ‘effective life’, which is how long that item is reasonably expected to last.
If it’s replacing the rusted part of the guttering, then it’s a repair. However, if the whole guttering is replaced, including the rusted part – it’s considered capital work.
Myth 3: When buying a place to rent out, investors can claim conveyancer’s fees as a borrowing cost.
Conveyancing, along with state or territory stamp duty and several other costs, aren’t deductible.
These are the costs of acquiring the property.
However, investors need to keep this information for when they sell their property and can use it to reduce the capital gains tax (CGT) cost base.
Myth 4: You only need a market valuation when you sell.
There are several reasons why property investors may need to get a market valuation, including when they sell.
When you earn income from your home, the ATO recommends property owners get a market valuation as Capital Gains Tax may need to be considered, including when using the home as a:
- long-term rental
- short-term rental
- running a business from home.
Myth 5: Having a rental property means you are in a business.
When you own a residential rental property, it’s likely you are an investor.
For this to be treated as a business by the tax department, you must have a lot of rental properties and manage them in a business-like manner.
Need more information on any of these?
Why not visit the ATO website for details about:
- Rental properties and travel expenses
- Repairs, maintenance and capital expenditure
- Borrowing expenses
- Using your home for rental or business
- Rental property as investment or business.
