As the ATO has come down hard on the investment property expense claims, you must ensure that you stay tax-smart. Now it has become even more significant to keep your finances under strict control. It has become imperative for you to prepare your ATO tax depreciation schedule with great care. ATO has stepped up efforts in finding out whether investors are ethically claiming their expenses or not. There were several instances when property investors decided to claim expenses that were not legitimate tax deductions. Amid such scenarios, the ATO is leaving no stone unturned to adopt measures that will curtail such incidences.
Given below are some important factors that will help you become tax-smart:
1. ATO gets tough
ATO carried out a random check of tax returns filed by property investors and found 9 out of 10 were wrong. It led the ATO to step up efforts on property investors who claimed expenses that turned out to be illegitimate. ATO used various data, property transactions, rental bonds, and online accommodation booking to check all tax returns. If you attempt deceitful or wrong claims, it may land you in the middle of a tax audit. You must prepare your ATO property depreciation report in an accurate manner. And, all your information will be scrutinised in detail. It will include your social media account, online accounts, social posts, etc. ATO will check everything that may give it the clue about your lifestyle and exact income.
2. Maintain your investment property tax records
It is of paramount importance to maintain all your receipts. If you failed to maintain your receipts, you may not recall where you kept all your receipts. You might support these expenses with the help of a bank account statement. But, the ATO and your tax agent may still want to see your receipt. They have a plain rule i.e. no receipt will mean no claim. It will also imply that you will be left with no money as years will go by. You may seek the help of professionals to get your property depreciation report prepared.
3. Get it correct
You must have an idea of what investment expenses you may or may not claim and how to claim them. This has emerged as one of the trickiest tasks for investors. If you commit any mistake here, you may land in some trouble with the ATO. It is essential to maintain all your vital statements, receipts, and bills along with income and expense records. You can keep a dated folder or some useful document filing system for keeping things manageable.
4. Separate your investment property finances
When you are in possession of an investment property, you may come across several income and expenses every year. You may track your income and spending without investing much time and energy. You may open a bank account for only maintaining your income and expenses linked to the property. It will help you stay updated and know precisely where you stand financially. During tax time, you only have to obtain a bank statement and separate your income, basic expenditure, interest, and mortgage payments, repairs and maintenance, etc.
The above steps will help you stay tax-smart and the ATO happy. The measures will help you stay on track with their taxes every year. If you have a doubt about how to prepare a rental property depreciation schedule, you may seek the help of experts. The experts will also ensure that you have claimed everything that you were entitled to claim. Amid the stiff measures adopted by ATO, you need to remain more vigilant so that they do not crack down on you.