Most Australian property owners make costly mistakes and overpay their taxes. These mistakes often lead to financial losses and mental distress, particularly with rising rates and strict ATO rules. In this blog, you’ll discover the hidden mistakes you might be making that are costing you money and causing stress and their expert solutions.
At last, we’ll also share some crucial information about reliable and trusted tax accountants in Kellyville to make your taxation journey stress-free and effortless. So, stay with us till the very end!
Mistake 1: Claiming Land Purchase Costs
Many investors mistakenly deduct the full property price, including land value, as a construction cost. However, land isn’t depreciable, so only building improvements qualify.
Solution: Use a quantity surveyor’s report to separate land costs from capital works. Then, claim deductions over 40 years for eligible structures.
Mistake 2: Misclassifying Repairs As Improvements
Renovations like new kitchens are often claimed as quick repairs, but they are actually capital improvements that depreciate over time. As a result, this triggers ATO audits and penalties.
Solution: Clearly distinguish repairs, which fix the function right away, from improvements that add value. Additionally, keep invoices and photos as evidence.
Mistake 3: Claiming Expenses When Unrented
Deductions for vacant periods or personal use don’t count, yet they’re common in Sydney’s shifting rental market.
Solution: Allocate expenses based on days available for rent. Also, document vacancy reasons and your marketing efforts.
Mistake 4: Incorrect Travel Expense Claims
Furthermore, trips to check Sydney rentals, such as car drives or flights for overseas owners, can’t be deducted. In fact, this ranks as a top ATO warning sign.
Solution: Exclude all travel costs and claim only direct costs like agent fees.
Mistake 5: Poor Record-Keeping
Failing to save receipts for seven years often leads to rejected claims in audits. For example, Sydney investors frequently skip digital backups.
Solution: Use apps like Xero or ATO myGov for cloud storage. Likewise, log income and expenses in order.
Mistake 6: Overlooking Negative Gearing Rules
Similarly, miscalculating losses from high interest against low rent income cuts benefits. After all, Sydney’s steep property prices make this error worse.
Solution: Track net income precisely and carry forward losses. Therefore, consult a tax agent for smart gearing plans.
Mistake 7: Ignoring Capital Gains Tax Concessions
Selling without holding for 12 months or using the main residence rules means full CGT hits. Meanwhile, Sydney’s hot market surprises many sellers.
Solution: Plan sale timing for the 50% CGT discount. Plus, include stamp duty in your cost base.
Mistake 8: Claiming Tenant-Paid Expenses
Besides, deducting water rates or utilities that tenants cover is wrong. Rather, reimbursements must reduce your claims.
Solution: Check lease agreements and bills closely and claim your own payments.
Mistake 9: Depreciating Assets Incorrectly
New items like air conditioners need depreciation schedules, not instant write-offs. For instance, mixing personal and rental buys draws scrutiny.
Solution: Rely on ATO tools or a quantity surveyor for schedules. Also, separate any personal use.
Mistake 10: Late Or Inaccurate Lodgments
Finally, missing deadlines or under-reporting income via data-matching brings penalties up to 75% plus interest. Overall, this hurts the most.
Solution: It is best to hire a registered agent and report all income from sites like Airbnb.
Avoid Costly Property Tax Mistakes With Prowess Business Advisors
Prowess Business Advisors, a reliable and trusted tax accountant in Blacktown, helps businesses and individuals navigate the complexities of tax, compliance, and financial management.
We ensure your financial management is streamlined and your business is growing with our personalised client-centric approach.
Our mission is to provide straightforward, strategic and practical advice that empowers you to make informed decisions.
Whether you want to streamline your financial process, save big on taxes and get more time to grow your business, we’re your all-time business partner.
Contact Prowess Business Advisors today and save big on your taxes and achieve your financial success today!