Five tax time mistakes to avoid
Tax time is popular among investors because it often brings a big refund.
Tax deductions for investors can deliver thousands of extra dollars into their bank accounts, but many make simple mistakes that either cost them money or get them in trouble with the Australian Taxation Office.
It's wise to avoid these tax time mistakes.
While it's great to grab a refund quickly, investors who file too early may find themselves in trouble with the ATO.
H&R Block director of tax communications Mark Chapman said while bank interest was typically pre-filled in tax returns within weeks, managed funds and other investments might not be finalised and pre-filled "until mid-September".
"There's a risk if you have investments in those funds and you lodge early, you can potentially miss stuff in your tax return," he said. And nobody likes a "please explain" from the ATO.
Investors who don't remember to claim everything they're entitled to are simply giving money to the government.
Interest on investment loans is often the biggest deduction, but landlords have a wide range of other claims including insurance, property management fees, maintenance and repairs, land tax, pest control and council rates.
The ATO has a helpful guide, Rental Properties 2019, available online and in print.
Investors are increasingly going global, and CPA Australia head of external affairs Paul Drum said all income, gains and losses from foreign assets and investment funds must be included in tax returns.
"Also check your entitlement to any foreign tax credits for tax you paid overseas," he said.
"The ATO's data matching and information exchange capabilities continue to evolve and now cover many capital transactions and investment revenue streams in Australia and overseas.
"Ensure you report any gains or losses from cryptocurrencies, especially as the ATO is now data-matching information from digital exchanges."
This is one of the most lucrative tax deductions for real estate investors because the claims don't involve spending cash.
The only money spent is the $600-$800 getting a quantity surveyor's depreciation report, which itself is tax-deductible and can be used for many years.
BMT Tax Depreciation chief executive officer Bradley Beer said its average claims for investors were above $8800 a year, more than $5000 above ATO averages.
"This difference suggests that many self-assessors are leaving thousands of dollars of tax savings unclaimed each year," he said.
LACK OF ADVICE
If in doubt, get professional help.
Messing up can be expensive, either through missed opportunities or ATO penalties.
"We often see investors making mistakes by not having a strong team of advisers around them and often trying to DIY their own claims," Mr Beer said.
"We believe good advisers, such as accountants and experienced property managers can be worth their weight in gold."