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Avoiding common rental property claim mistakes

18 Jan 2012 11:19 AM -

The Australian Taxation Office (ATO) has identified some common mistakes being made by individuals who are claiming for rental property agent fees and commissions.

Property agent fees are charges such as regular management fees, letting fees, or commissions paid to a property or real estate agent for managing, inspecting or collecting rent on behalf of the owner.

Property or agent fees can only be claimed if they are paid to a legitimate entity or person who is genuinely managing the rental property.

In order to ensure you are covering your bases, it’s essential you retain your statements from your property agent, which are usually distributed monthly.

Avoiding Common Mistakes

The three most common mistakes made by taxpayers are:

  • Claiming commissions or other costs paid to a real estate agent or other person for the sale or disposal of a rental property.
  • Claiming fees paid to any entity or person engaged to locate a suitable rental property for you to purchase.
  • Incorrect labelling of management fees which include a number of expenses rolled into one amount. For example, a management fee that includes cleaning and/or repair costs.

A working example

ABC Enterprises is a specialist company which locates suitable rental properties for investors to purchase. The taxpayer, Sally, sees an ABC advertisement in the newspaper and engages them to find her a rental property. ABC charge Sally $1,500 for the service of locating a suitable property, which she subsequently purchases.

Susan cannot claim the fee she pays to ABC as a property agent fee or commission deduction. She can, however, add this $1,500 expenses to her cost base, which she uses to work out her capital gain or loss when she eventually sells the property. So it’s important she keeps the paperwork for this transaction for when she claims down the track.

Getting it right

When purchasing property, it’s important you are fully aware of what expenses you can and can’t claim for.
Taxation Accountants can offer you the appropriate advice and assistance to ensure you are complying with all the ATO’s requirements and getting the most out of your investment.

It’s never too early to invest in your future