There are several small but important misconceptions about property investment that can catch out new or would-be landlords.
The Federal Government provides attractive financial incentives for property investment, and you don’t want to miss out on those benefits. But it can be easy to get it wrong and find yourself with a nasty letter from the Australian Tax Office, especially on the issue of interest expenses.
That’s why it’s advisable to obtain professional financial advice and use a professional property management team to take away the day-to-day hassle and worry of being a property investor and provide you with the regular reports to make the end of financial year a breeze.
Below are a few common misunderstandings below about interest expenses.
According to the ATO, while interest and loan expenses may be claimable, there are strict rules around this. You can’t claim a deduction for interest expenses:
- For any period that you used the property for private purposes, even if it’s a short period. Be sure to nominate any period with your adviser or tax consultant to comply with legislation.
- You can’t claim any portion of the original loan that you hived off to pay or service another debt, buy a new car, a new washing machine, or be placed straight into your superannuation account. That remains true even if you’re ahead in your repayments
- You cannot claim on a separate property loan for which you’ve used your rental as security unless that second property produces income.
Keeping great records is the key to submitting an accurate return.
In all circumstances, it’s advisable to seek professional financial advice before buying an investment property or expanding your portfolio. My article here is for general purposes only and is not professional advice.