Tax

Tax time focus on rental property income and deductions

The ATO is focusing on four major concerns this tax season when it comes to rental properties.

Concern 1: Include all rental income

When preparing tax returns, make sure all rental income is included, such as from short-term rental arrangements, renting part of a home, and other rental-related income like insurance payouts and rental bond money retained.

Concern 2: Accuracy of expenses

Not all expenses are the same – some can be claimed straight away, such as rental management fees, council rates, repairs, interest on loans and insurance premiums. Other expenses such as borrowing expenses and capital works need to be claimed over several years. Depreciating assets such as a new dishwasher or new oven costing over $300 are also claimed over their effective life.

Concern 3: Capital Gains Tax upon sale of a rental property

When selling a rental property, capital gains tax (‘CGT’) needs to be considered and any capital gains or capital losses need to be reported. When calculating a capital gain or capital loss, it’s important to get the cost base calculation right. It is also important to note that when selling any property for $750,000 or more, vendors/sellers must have a clearance certificate otherwise 12.5% will be withheld. These clearance certificate applications can take up to 28 days to process so to avoid delays, sellers should apply as early as practical using the online form.

Concern 4: Record keeping

Records of rental income and expenses should be kept for five years from the date of tax return lodgements or five years after the disposal of an asset, whichever is longer.

If you are thinking about purchasing a rental property please reach out to your local accountant for more information.

The Morrison Government is taking action to ensure that COVID‑19 tests (including Polymerase Chain Reaction and Rapid Antigen Tests) are tax deductible for hard‑working Australians, and exempt from fringe benefit tax for businesses, where they are purchased for work‑related purposes.

To remove any doubt, the Government will introduce legislation to make clear that work‑related COVID‑19 test expenses incurred by individuals will be tax deductible. This applies both when an individual is required to attend the workplace or has the option to work remotely.

By introducing this legislation, the Government will also ensure that fringe benefit tax will not be incurred by employers if they provide COVID‑19 testing to their employees for work‑related purposes.

This change will take effect from the beginning of the 2021‑22 tax year and will be in place permanently.

This action recognises that COVID‑19 tests are an important tool for mitigating transmission risks and absences from the workplace.

If you have any other questions in regards to tax deductions for the 2021/22 financial year, please email sophie@advantagebusinessgroup.com.au