Real Estate – Financial Year Records

When preparing your end of year financials property managers and investors need to consider a wide variety of factors for taxation.

Most investors are likely to agree: the calibre of a property manager is often measured by their record keeping and reporting standards; at least this is true at the end of the financial year. The standard of record keeping and reporting can make or break a tax return. If the records aren’t up to scratch, then providing appropriate and correct information to the tax office can be very difficult. Changing Places prides itself on its property management expertise. To prove how good we are we offer a fixed management rate of 4.4% for the first 6 months.

Quality record management is something that needs to be ongoing; so if you find that it is not up to scratch this year, make sure the bar is reset and your portfolio is being managed appropriately in the new financial year. Record keeping for the end of financial year can be broken down into three distinct areas: income, expenses and depreciation.

Income related to the investment property is probably the simplest area to keep track because there is generally only one revenue stream for each property: rental income. A good property manager will provide a concise summary of rental payments received over the last financial year. Investors should ensure all rental payments have been accounted for and that rental income amounts correspond with bank statements.

Expenses can be somewhat more complex, as it involves a (very) wide variety of items. The list detailed within provides a solid overview of the normal expense items that should be included as part of an investment property claim. It is important to ensure all of the claimable expenses are included as part of the end of year assessment on the property in order to obtain the greatest tax benefit possible.

Depreciation refers to normal ‘wear and tear’ to the asset, capital works and other depreciable items such as fixtures, fittings and appliances. The depreciation schedule is one of the most important documents relating to an investment property. For investors it is best practice to engage a quantity surveyor before the property is leased, in order to have a complete and accurate depreciation schedule in place. If you are seeking to claim depreciation on improvements or construction work, but don’t have receipts, you will need a valuation report on the property.

Property Purchased in 09/10 Financial Year:

If the property was purchased in the latest financial year, the tax office will require details of the property including the purchase date, settlement date and purchase price. Other purchase documentation will include paperwork relating to the mortgage (borrowing and set up costs of the loan, stamp duty on the mortgage and government charges) and the date the property was made available for rent.

Keep in mind Changing Places are not taxation advisers, accountants or financial planners. We recommend you seek independent professional advice and guidance when undertaking your end of financial year activities. However Changing Places can save you substantial amounts of money with all your real estate transactions.

Go to www.changingplaces.com.au/landlords.html to find out more.