Australians love nothing more than buying property. Investing in bricks and mortar is a comforting and often easy investment decision for many investors, particularly those who feel  at ease with buying something tangible.

This love affair has only deepened since legislation changed to allow Self Managed Superannuation funds to borrow for property investment in 2007. Since this time,  we have seen a definite shift of investors within superannuation towards the property asset class. Our office receives hundreds of enquiries each month from potential investors wanting guidance on buying a property inside an SMSF.

The ATO has recently highlighted some of the frequent mistakes relating to property deductions identified in tax returns:

• Overstating interest deduction claims on loans for buying or renovating the property
• Incorrectly claiming deductions on properties that are not rented for the full tax year; i.e. a property that also serves as a holiday home for part of the year
• Incorrectly claiming “structural improvement” costs i.e. building a pergola or installing a new bathroom,  when they are actually capital works deductions
•  Claiming deductions on properties that are not being rented for income purposes.
  

  Partner & Director Lisa Morgan presenting at one of our seminars

The following is a list of common expenses that investors incur, which are not currently deductible:

• Purchase costs i.e. stamp duty on transfer or legal costs
• Disposal costs i.e. sale advertising or agent sale commissions
• Ongoing costs which are met by tenants i.e. gas, electricity or water costs
• Expenses for the property when it is used for personal use i.e. the owner uses as a holiday home for part of the year.

For a full and comprehensive list of what is deductible in relation to a rental property, Maddern Accountants can certainly help you. We have hundreds of SMSF property investments under our belts, and consider this to be our centre of  excellence. Please feel free to phone on 03 9999 7200 to arrange an appointment with a property taxation specialist.

Disclaimer: All information provided in this newsletter is of a general nature only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.