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Rental property and tax

The Tax Office is reminding individuals who either own or are looking to purchase a rental property that there are essential record-keeping and taxation obligations that they must meet.

Examples of records to keep (for the period the individual owns the property for and up to five years after it is sold), include:
– Rental income
– Contract of purchase and sale
– Expenses
– Loan and refinancing documents
– Periods when the property was used for private use (i.e., family use)
– Steps taken to rent out the property (i.e., advertising)

Individuals must also declare all income they receive from renting out their property.
Examples of income may include:
– Rent received (before fees or expenses)
– Reimbursement for deductible expenditure
– Any fees collected from cancelled bookings
– Insurance payouts
– Booking or letting fees

Individuals can claim many expenses related to the property as immediate tax deductions or deductions over a number of years.

Immediate expense deductions include:
– Repairs and maintenance on the property
– Loan interest
– Property management fees

Expenses to claim as deductions over a number of tax returns include:
– Depreciating assets
– Capital works or improvements
– Borrowing expenses

Expenses accrued in buying or selling the property, using the property for personal use or travelling to inspect the property will not qualify for tax deductions.

While individuals can not claim expenses relating to buying or selling the property, these will form part of the Capital gains tax (CGT) calculations.

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News

Changes to FBT for Utes

September 14, 2018

The Australian Tax Office (ATO) has released draft guidelines changing its previous stance on Fringe Benefits Tax (FBT) for utes. Amendments originated from reports that dodgy tax returns were responsible for a loss of $8.7 billion in income tax due to wrongful claims. Failure to comply with new requirements listed below may result in a 20 percent FBT imposed on the cost of the vehicle.

The requirement of a logbook
New rules require employers to ensure their workers using these vehicles keep detailed logbooks. Whether the logbooks are electronic or hard copy, it is vital that the process be effective for returns lodged in the 2019 FBT year, when the law takes effect. Employers receive confirmation via email from employees using the vehicles at the end of the 2019 FBT year with their logbook including all regulated diversions and private use.

Diversions and private use rules
The guidelines introduce capped limits for the log books to comply with. Professional travel means that the vehicle must not deviate more than 2km from its usual route. However, 1000 km of non-work related travel is allowed, provided that there is no single trip exceeding 200 km. Such regulations provide greater flexibility than previous guidelines. What the ATO deems “minor” or “irregular trips” like carpooling the children to and from school or an occasional trip to visit relatives will not render you non-compliant so long as it is recorded as non-professional use.