Rental Property Record Keeping and Deductions

Record Keeping for Rental Property

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If you rent out property – rental and/or holiday rental, there’s a plethora of record keeping requirements that are required by the ATO to stay on top of your investment requirements for the income and deductions related to the investment property. The ATO’s review of income tax returns found that common mistakes are; rental income being left out, or mistakes being made with property related deductions – like over-claiming expenses or claiming for improvements to private properties.

If you have an investment property it’s important to:

  • keep records right from the start
  • work out what expenses you can claim as deductions
  • work out if you need to pay tax instalments throughout the year
  • declare all rental-related income in your tax return
  • consider the capital gains tax implications if you sell.

Some specific records that should be kept for five years include:

  • bank statements showing the interest charged on money you borrowed for the rental/commercial property.
  • loan documents
  • land tax assessments
  • receipts for; advertising, bank charges, council rates, gardening, property agent fees, repairs or maintenance, capital improvements.
  • documents showing details of expenses related to; decline in value of depreciating assets and any capital work expenses.
  • before an after photos of any capital works
  • documents that show periods of personal use by you or your friends of the property
  • documents that show periods the property is used as your main residence
  • tenant leases
  • when you sell a property; contract of sale, conveyancing documents and sale of property fees.

If you have an investment property that isn’t rented or available for rent, such as a holiday home, then you generally can’t claim deductions because it doesn’t generate rental income. The ATO have an extensive Rental Properties page that is a great resource.

This year the ATO is particularly focused on interest expenses and ensuring rental property owners understand how to correctly apportion loan interest expenses where part of the loan was used for private purposes (or the loan was re-financed with some private purpose).

If you have any questions  or queries related to record keeping for rental properties don’t hesitate to get in contact with us.