What is tax deductable for a rental property? variation

[fullylucky]

Hi guys,

I'm trying figure out what is tax deduct-able?

Background:
It's an investment property.
I rent rooms out individually and the rent includes water and electricity. (fully furnished).
I don't live there. I bought it in Feb this year 2014.

Here is everything related to the investment property (i've kept all receipts):

https://dl.dropboxusercontent.com/u/16014949/taxdeductable.jpg

My understand of what is tax deductable:
Repair costs.
Bills. Are electricity and water bill tax deductible?
Is insurance deduct-able?
I recently saw a video on youtube but I think it was for properties in USA. Mileage travel from and to repair supplies shop, or travel to the IP, if you stay at a hotel for interstate, also count as tax Deductable. Is this true for Australia?

What about other items on my list? are they deduct-able?

What about appliances? like fridge or kettle? how does the numbers work? 25% over 4 years? say it costs $100 for the first year it's $25 but what about future years? will it still be $25 or $25 then times inflation? so $25.63?

Also can I deduct stamp duty and other fees? how do they work?

Any other tips welcomed as well.

Thanks in advance.

Also I'm gonna try to fill out e-variation on the ATO's website. If you have tips for that please let me know. Thanks

 

[coastymike]

Water = deductible
Electricty = deductible
Insurance = deductible.

Travel. Depends. If to inspect the property prior to acquisition no. Travel to inspect property and talk to agents. Potentially. If trip included other things may require apportionment.

Depreciation. Depends whether using prime cost method or diminishing value method. Are assets to be included in the low value pool.

Stamp duty not deductible added to the cost base.

 

[Rolf Latham]

Also I'm gonna try to fill out e-variation on the ATO's website. If you have tips for that please let me know. Thanks

My tip is..............

Dont worry about being lucky.

Make your own luck and use a decent tax agent or accountant.

This is one area where fluffing around the edges may get you into deep DEEP trouble long term.

There is a difference between being frugal and prudent.

Prudence wins over Frugal, because even frugality demands spending neccesary money!

ta
rolf

 

[fullylucky]

My tip is..............

Dont worry about being lucky.

Make your own luck and use a decent tax agent or accountant.

This is one area where fluffing around the edges may get you into deep DEEP trouble long term.

There is a difference between being frugal and prudent.

Prudence wins over Frugal, because even frugality demands spending neccesary money!

ta
rolf

I wanna try myself first.

If I fail then I'll use an account. I don't have an account degree but I can do maths and I know how to use excel... I heard a lot of the times the accountant asks you for the information and you spend just as much time answering them as if you did it yourself. (no offense to accountants) I gotta try the very least myself... maybe the first time it is hard but then every year it will be easy!

I remember reading etax splash screen message. The guy was saying as long as you tried and it's an honest mistake then "it's all good bro." or something along those lines.

 

[Terry_w]

I remember reading etax splash screen message. The guy was saying as long as you tried and it's an honest mistake then "it's all good bro." or something along those lines.

Yeah right!

While mathematical skills are not needed how is your knowledge of tax law?

Is there are splash screen which says 'don't worry if you forget to claim something we will tell you about it, bro!'?

e.g Many forget to claim LMI on investment properties - especially in one hit when refinancing.

 

[D.T.]

Username seems apt

 

[pinkboy]

I wanna try myself first.

Would you try brain surgery first? Would you try to cook drugs using youtube? Would you pilot an aeroplane walking straight in the cockpit and jumping on the joystick?

You are trying things @r$e about. Use an accountant for the first year or 2 to get the knowledge on how things are done, then you can do your own when you're confident to do so. You will save in the long run both on cost and jail time!

pinkboy

 

[coastymike]

guy who said "you'll be right bro" is incorrect.

If the variation is out by parameters set by the ATO. They are on the ATO website then penalties and interest apply.

 

[Paul@PFI]

Property Investors Tax Guide
If you dont understand every aspect of this guide then use a tax agent who does.

Variation tips:
1. Slightly underestimate costs and over estimate income. You dont want to be acurate and leave no room for error. You actually want some breathing space so a second refund occurs when you lodge the final return. Penalties apply if you get it wrong.
2. Allocate time and dont miss any info. ATO are quite happy to decline the application. Important issues are YTD earnings, payroll and employer contact details.
3. Dont ignore capital gains.
4. If a CGT event occurs make sure you get maths rights. Common issue is CGT profit divided by two less CGT loss = Net CGT loss which reduces net taxable income. Real situation is CGT profit minus loss = net CGT position which adds to taxable icnome but never reduces it.

 

[Paul@PFI]

I

I remember reading etax splash screen message. The guy was saying as long as you tried and it's an honest mistake then "it's all good bro." or something along those lines.

The Commissioner !! Its his job to maximise income of the Commonwealth. And you believe what he says ? He is the guy who charges $850 for a late lodgement when $20 tax due.

 

[fullylucky]

Yeah right!

While mathematical skills are not needed how is your knowledge of tax law?

Is there are splash screen which says 'don't worry if you forget to claim something we will tell you about it, bro!'?

e.g Many forget to claim LMI on investment properties - especially in one hit when refinancing.

My knowledge of tax law aint that good...

so you're saying... tax agent can save me more money than the cost of hiring him/her... that's a good point...

I don't have LMI.

 

[fullylucky]

Would you try brain surgery first? Would you try to cook drugs using youtube? Would you pilot an aeroplane walking straight in the cockpit and jumping on the joystick?

You are trying things @r$e about. Use an accountant for the first year or 2 to get the knowledge on how things are done, then you can do your own when you're confident to do so. You will save in the long run both on cost and jail time!

pinkboy

ok i'll consider using accountant once then... once i learn his/her secrets... then i'll do it solo muhahaha.

i'm gonna try to exhaust all other avenues first.

if no choice then i'll turn to an accountant.

 

[Terry_w]

LMI was just an example. But my point is that you don't know what you don't know.

I used to do my tax returns myself work out my refund and then submit it to the tax agent to do and they always found enough extra to justify their fee.
This was good practice and hellped me learn about tax along the way.

 

[fullylucky]

guy who said "you'll be right bro" is incorrect.

If the variation is out by parameters set by the ATO. They are on the ATO website then penalties and interest apply.

i haven't done any variation yet. my first time... the only tips i got from people are work is to do it before the start of the next fyear so it kicks in on your first pay check.

also you can't just do it for one property. each time you submit you need to submit everything, all properties otherwise it overwrites it. (doesn't affect me coz i only have just the one IP).

get all ducks (numbers) lined up before doing the form since it that much easier to fill in.

so that's why i'm just asking around now (with this thread) to clarify and get my head around what is tax deductible and what's used to minus the base cost.

https://dl.dropboxusercontent.com/u/16014949/taxdeductable.jpg

so the green items in the list... are they tax deductable? or only 25% of value of each item is tax deductible and i do it for four years or what?

 

[fullylucky]

LMI was just an example. But my point is that you don't know what you don't know.

I used to do my tax returns myself work out my refund and then submit it to the tax agent to do and they always found enough extra to justify their fee.
This was good practice and hellped me learn about tax along the way.

ok.... how much is their fee normally for one IP and job (not much tax deduct-able with the job)????

say they charged $2k that means ... they would have had to find around $5.7k in deductions that you failed to find...

 

[fullylucky]

LMI was just an example.

if everyone just mentions or explains one point then everything accumulates.

sum of parts equals a whole (i'm just thinking positive) but yet i get your point i don't know what i don't know...

 

[fullylucky]

Property Investors Tax Guide
If you dont understand every aspect of this guide then use a tax agent who does.

Variation tips:
1. Slightly underestimate costs and over estimate income. You dont want to be acurate and leave no room for error. You actually want some breathing space so a second refund occurs when you lodge the final return. Penalties apply if you get it wrong.
2. Allocate time and dont miss any info. ATO are quite happy to decline the application. Important issues are YTD earnings, payroll and employer contact details.
3. Dont ignore capital gains.
4. If a CGT event occurs make sure you get maths rights. Common issue is CGT profit divided by two less CGT loss = Net CGT loss which reduces net taxable income. Real situation is CGT profit minus loss = net CGT position which adds to taxable icnome but never reduces it.

I'm not going to sell my one IP that i bought recently anytime soon. will I have to worry about CGT at all? or do you have to estimate what the IP gained over the year?

 

[Simon]

ok.... how much is their fee normally for one IP and job (not much tax deduct-able with the job)????

say they charged $2k that means ... they would have had to find around $5.7k in deductions that you failed to find...

Should be a lot cheaper than that. Especially if just a variation.

I prefer not to vary my income tax. I find getting the annual lump sum a type of enforced saving. I don't reckon I'd end the year with it had I been paid it per fortnight

 

[fullylucky]

Should be a lot cheaper than that. Especially if just a variation.

I prefer not to vary my income tax. I find getting the annual lump sum a type of enforced saving. I don't reckon I'd end the year with it had I been paid it per fortnight

you would lose out on the interest you could be saving if you put that money into your PPOR homeloan. or you could be doing other stuff with that money. better to get it earlier i reckon...