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Property investors need to know the rules

Many rental property owners are ill-informed when it comes to what they can and can’t do to minimise tax on their investment property income.

Speaking at an investment property forum hosted by Ray White Dalby last night, BMO Partner David Briese encouraged rental property owners to work closely with their accountant to get their deductions right.

“Some people dive into property investment thinking it’s going to be one big tax write off, but, in fact there are many rules around what can and can’t be considered a tax deduction.”

He said landlords should familiarise themselves with the difference between repairs, maintenance and capital works.

“Repairs relate to when you have to remedy a defect, damage, or deterioration of the property, such as replacing part of the guttering or windows damaged in a storm, while maintenance is what you do to prevent deterioration, such as painting the house or oiling a deck.

“Both repairs and maintenance are 100 per cent deductible.”

If you put in a new kitchen, build a new fence or add a carport, the deductions are lower.

“Improvements and renovations are capital works deductions which are usually deducted at 2.5% per year in the 40 years following construction.”

Mr Briese said it was important to consider your own individual wealth creation strategy and future goals, not just tax benefits, when making decisions about your investment property.

“Even though the tax deductions on improvements are lower, it may still be worth doing as it might help lead to higher rental income or better capital growth down the track.”

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