Rental Property updates

If you’ve invested in residential property, you may be scratching your head over whether recent tax changes affect you.

If you borrowed to acquire residential property before March 27, 2021, interest deductions will be phased out over the next three years. If you bought on or after March 27, 2021, you won’t be allowed to deduct interest incurred after October 1, 2021.

There are exemptions to this – call us if you’re not sure.

Wondering if it’s worth claiming for operating expenses like vehicle costs when you travel to your rental property? It all adds up, so here’s what you can claim for:

●         repairs and maintenance (but not renovations that substantially improve the value of the property)

●         professional services fees, like accountants, lawyers, or property managers’ rates and insurance

●         mortgage repayment insurance

●         vehicle and travel expenses

●         depreciation on capital expenses, like whiteware, appliances, or heat pumps

●         legal fees involved in buying a rental property if the expense is $10,000 or less.

REMEMBER:

●         If you’ve taken out a loan for a business purpose, e.g., to buy a new business asset, and the loan is secured against a residential rental property, you’ll still be able to claim the interest as an expense.

If you have a property with existing mortgage interest that fits the frame for the interest phase-out applying from 1 October, we can calculate the interest phase-out for this year for you.  And let us know if you bought or sold residential investment property during the year so we can give you an accurate picture of your tax exposure now and going forward. The brightline test for property sales on or after 27 March 2021 is now 10 years (up from 5 years for properties acquired between 29 March 2018 and 27 March 2021).