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With ATO data showing that 9 out of 10 property investors make errors in their tax returns, the ATO is specifically targeting claims such as repairs and maintenance versus depreciable assets, the interest component of investment loans, and ensuring that your property is genuinely available for rent. Mike and Jeremy delve into each of these items in detail, sharing clear examples of common mistakes and how to optimise your claims while adhering to ATO rules.

Jeremy explains how the ATO is now integrating with property management software and banking institutions to obtain firsthand data which can be cross-checked with individual tax returns. He highlights specific errors which can be flagged in this process, such as missed water contribution declarations, or investment loans being taken out for owner-occupied dwellings to overcome borrowing capacity issues.

The interest component of investment loans is a hot topic, with investors refinancing properties and using a portion of funds for personal expenses while continuing to claim the full interest expense. Jeremy also explains why it’s so important to get the loan structure right, especially when there is more than one borrower on very different income tax rates.

Mike and Jeremy delve into the difference between immediate deductions for repairs and maintenance, and the depreciable impact of capital improvements. With the ATO noting that many investors get caught up by this complex issue, the detailed explanation and examples covered in this conversation will go a long way to setting you up for success. Mike also shares the three triggers he looks for to determine likely worthwhile deductions in an investment property.

On top of the wealth of information shared in this episode, Jeremy shares his top tips for preparing for your accountant, and provides a showbag of his own templates for downloading. These invaluable tools include a monthly property investment summary and a CGT and cost base template, ensuring you have everything organised and at your fingertips to maximise your return this season.

Here at MCG, we are passionate about creating a forum and education series for property owners and investors. We do depreciation differently, and offer a set rate for Replacement Cost Estimate reports. A first in the industry. Join our clients saving more on their tax today  https://www.mcgqs.com.au/

Podcast Transcript

In this special episode of the Geared for Growth podcast, host Mike Mortlock welcomes back Jeremy Iannuzzelli for a timely webinar focussed on crucial tax season tips for your investment property. As the Founding Partner of KHI Partners and a dedicated property investor, Jeremy is well-equipped to explain the main criteria flagged by the ATO, and in this conversation provides valuable insights and templates to help you pull together all the information you need to seamlessly prepare for your accountant.

What we cover in this episode

What we cover in this episode

  • What the ATO is targeting this year in relation to property investment deductions
  • How the ATO is integrating with property management and banking software to get access to data
  • Getting the loan structure right, especially when refinancing or using funds for personal expenses
  • The difference between repairs and maintenance, and depreciable assets
  • The treatment of initial repairs on investment properties
  • How to prepare for your meeting with your accountant
  • Examples of the items that often get missed in tax returns
  • The treatment of strata special levies and insurance claims and proceeds
  • Mike shares three triggers which tell you there are likely worthwhile deductions in your property
  • Jeremy shares his showbag of tax and investment templates to make your tax time a breeze

Quotes

“Properties being purchased in disrepair is a really big one. Generally (when) people buy property that need a fair bit of work to get it into a rentable state, those costs sometimes are not repairs and maintenance, they more often need to be included as part of either the cost base or potentially can be depreciated” 3:14

“The banks are now integrated with the Australian taxation office, they’re now handing over all of the data for the interest that’s being claimed on loans and those loans that are deemed as investment loans” 4:40

“The tax office actually had some very clear, not grey but very black and white definitions, that if you convolute the loan too much Mike that actually can deny the whole interest expense even if there is validity to it. If you can’t clearly show what is deductible and what is not and the loan becomes too convoluted they actually take a very clear stance and say the whole loan becomes non-deductible” 6:43

“They also know, and there’s been some psychological studies being done and tax agents and accountants alike we get to see that data but during times of inflation and higher cost of living people do become more cheeky and the statistic is 82% of returns will actually inflate their expenses this year compared to prior years because of the higher cost of living” 12:40

“I just wanna add 1 little thing to what you said before about providing accountants the list of repairs and the list of depreciation MCG is the only depreciation quantity surveying company out there that does that” 15:45

“I always tell clients have you swapped something that’s old for something that’s new and I talk about that tangibility and the percentage, if you know 80% of what you’ve done is old for new or 70% of what you’ve done is old for new it is depreciation” 18:15

“I prepare my numbers on a monthly basis I know exactly how my whole portfolio across all the 23 properties that I own tracks I know exactly the position that I’m in and with that I pretty much know what I’m in for from the tax liability at the end of the year so I’m not surprised” 25:30

“We actually looked at 1000 residential property investors that came through our doors to get a depreciation schedule, so now what we wanted to follow did any of them miss out on deductions because they were a little bit slow in getting in touch with us… 6.7% of investors waited so long that they would have missed out on deductions… the average amount that they missed out on in deductions was $20,537”  Mike 39:50

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