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Set up a user-friendly record-keeping system as your top priority. You can use professional software or something as straightforward as a spreadsheet for this. Keep track of each transaction you make while owning the property. Purchase and sell agreements, as well as paperwork related to conveyancing and loans, are included in this. To make it simpler to store and access your receipts, scan copies of them. Keep in mind that you can collect whatever you are entitled to if you keep records of all your earnings, spending, and efforts to rent out your property.

Get Stress-Free Tax Season with Organised Records

No matter whether you seek help from a tax agent or do it yourself, you are required to maintain records properly over the period you own the property. It is essential for you to maintain records at every stage of your journey to make sure you can claim everything you are subject to, such as:

  • Buying
  • Owning
  • Selling

When buying the property, you need to maintain the following records:

  • Purchase’s contract
  • Conveyancing documents
  • Loan documents
  • Costs to buy the property
  • Borrowing expenses

You need to maintain the following records when owning the property:

  • Proof of earned rental income
  • All your expenses
  • Time of private use by you or your friends
  • Time the property is used as your main residence
  • Loan documents if you are likely to refinance your property
  • Efforts to rent the property out
  • Capital improvements

When you sell the property, you need to keep a record of the following documents:

  • Contract of sale
  • Conveyancing documents
  • Sale of property fees
  • Capital gain or loss calculation

Steps to Consider When Preparing Your Return

Rental property owners need to consider the following three simple steps when they prepare their return:

  • Record All the Income You Receive

It includes:

  • rental arrangements for short term (e.g. a holiday home)
  • sharing a portion of your home
  • other income related to rental such as insurance payouts and rental bond money you have
  • Keep Your Expenses Right
    • Eligibility – You are allowed to claim expenses incurred for the time period your property was rented or when you were attempting to rent the property on commercial terms.
    • Timing – Some expenses need to be claimed over a number of years.
    • Apportionment – You need to apportion your claim where your property was rented for a part of the year or only a portion of your property was rented, where you occupied/used the property for yourself or rented it below the market price. You need to apportion in order with your ownership interest.

What to Look at When Selling an Investment Property or Main Residence?

  • Even if you transfer the property into someone else’s name, there is a possibility that you will be liable to pay capital gains tax.
  • Capital gains refer to the profit you make from selling or transferring a property, which is calculated by subtracting your cost base (the expenses associated with ownership) from your capital proceeds (the sale price or market value at the time of transfer).
  • If your cost base exceeds your capital proceeds, you can report a capital loss, which may offset future capital gains.
  • It’s important to note that if you have previously claimed deductions for capital works or depreciation in any income year, these amounts should not be included in your cost base.
  • If you have owned the property for at least 12 months and you are an Australian resident, you may qualify for a 50% discount on the capital gains tax.

Conclusion

The blog shares the importance of keeping records throughout the period you buy the property, important steps that you need to consider when preparing a return along with a few things that you need to keep in mind when selling an investment property or main residence. For more information, contact Reliable Melbourne Accountants.

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