PEOPLE who plan to dive into the investment property market this year are being warned by the Australian Taxation Office to avoid making mistakes.
It said there were some common mistakes made when claiming rental deductions and the penalties could be costly.
"The comprehensive tax office guide, Rental Properties, can help investors get it right first time,'' the ATO said.
It said there were two categories of rental property expenses that could be claimed:
*Expenses for the year you paid them, such as council rates, repairs, insurance and loan interest.
*Expenses that are deductible over a number of years, such as borrowing costs, creating structural improvements and costs of depreciating assets.
"You cannot claim costs associated with acquiring or disposing of a property, but they may form part of the cost base of the property for capital gains tax purposes,'' the ATO said.
"Renovation costs and costs to repair damage, defects or deterioration existing on purchase cannot be claimed as an immediate deduction. These costs are capital expenditure, depending upon what is repaired or improved, and must be claimed as either decline in value deductions over the asset's effective life, or as capital works deductions over 40 years,'' it said.
The free information booklet for investors is available at www.ato.gov.au or by telephoning 1300 720 092.
Common mistakes
* Claiming deductions for rental properties not available for rent.
* Incorrectly claiming deductions for properties only available for rent part of the year, such as a holiday home.
* Claiming the cost of structural improvements as repairs when they are capital works deductions.
Overstating deduction claims for the interest on investment loans which have a private portion.
Source: ATO
