April 2025
Of course you can plan to pay less tax.
Businesses do it all the time. They spend a lot of effort working out how to reduce their tax bill.
Owning an investment property is just like running a business. There is income (rent) and there are outgoings (expenses).
Depreciation is an outgoing business owners make great use of. They depreciate their vehicles, machines, furniture, computers etc etc.
Property investors depreciate their buildings and the Assets inside them. So one of the best ways you can pay less tax is by making sure you have a watertight Depreciation Schedule and that it is up to date.
How good is yours? Do we need to talk? Make an enquiry here or you can reach us on 1300660033.
It’s only 10 weeks till the end of the financial year. There is no point getting in touch with your accountant in the last week of June to chat about tax planning – they’ll be too busy to even answer the phone. This is the time to start planning.
Property is our area, but there are things like maximising your concessional contributions to Super you should think about.
As for property, are there expenses for next year you can bring forward into this year? Payment for council rates, strata fees, interest payments, insurance can often be brought forward.
Now is the time to do any repairs or improvements your property needs – and to know the difference between repairs and improvements. We write about this often, most recently here.
Now is also the time to buy Assets – and to know how best to claim them.
We have a handy checklist of property related tax deductions you can download here: Property Related Tax Deductions 2025.
Key Points
- 1. Keep your Depreciation Schedule up to date and claim depreciation for any improvements you’ve made to your investment property in the last financial year.
- 2. Now is a great time to purchase Assets for your investment property and claim the cost back quickly as the end of the financial year approaches.
- 3. What is the ATO looking out for this year? The ATO have announced Data Matching programs to ensure short term rental property owners and landlords are declaring income earned correctly.
When is a repair not a repair?
When it’s an improvement.
Repairs can of course be claimed as a 100% immediate deduction, but the ATO’s definition of a repair is different from yours.
To the ATO, a repair means work you have done to rectify damage that has occurred while YOU were renting out the property. The longer you have been renting out a property, the greater the scope to claim work as repairs.
Putting through a large repair claim after only renting out a property for a year or so will likely prompt a ‘please explain’ letter.
So if you can’t claim work as a repair, what do you do?
Claim it as an improvement and we’ll add it to your Depreciation Schedule free of charge. We do that all the time for our clients. All you do is send us an email telling us what you did, when, and what it cost – we don’t need receipts.
You can also bring forward any maintenance work and do it this year if the deductions would be more helpful this year – no point spending money in July if you could have spent it, and then claimed it, in May or June.
We have written about repairs more extensively here.
Buying Assets
Now is a great time to purchase Assets for your investment property – you’ll be able to claim the cost back quickly with the end of the financial year just around the corner.
When we write ‘Assets’, we mean things that can be depreciated quickly.
The ATO is very definite about what is an Asset vs what is Capital Works i.e. part of the building.
One test is to think of whether the item can be removed very easily and carried away without affecting the building.
Fans, appliances, floor coverings, hot water heaters, curtains and blinds, air con units etc are easy to remove – we know this because a client building a house disappointingly just had them all removed one night.
Things that are part of the building and depreciate at 2.5% per year are shower screens, toilets, tap ware, benchtops, doors etc.
If you buy an Asset costing less than $300, you claim the cost as an immediate deduction.
And if you buy an Asset costing between $300 and $1,000, it can go into the Low Value Pool and depreciate at 18.75% in the first part year and then 37.5% per year after that. How good is that!
Assets costing over $1,000 depreciate according to their Effective Life and when their value falls below $1,000, our software drops them into the Low Value Pool. You can read more about the Low Value Pool here.
Then there is the Instant Asset Write-Off for Small Businesses. The threshold for this moves around a bit, but currently businesses are able to write off immediately Assets costing up to $20,000. You can stay up to date with these changes via the ATO website here.
What is the ATO looking out for this year?
The list keeps growing.
And the ATOs data matching prowess is getting better and better.
We have written before here about how short term rental platforms now send income data on property owners to the ATO.
And how banks pass on loan information.
The ATO also gets information from the various state rental bond boards. If there is a bond lodged for a property and no income declared for that property, they’ll be asking some awkward questions.
The most recent date matching exercise has involved property managers – sort of. The ATO has put the hard word on the software providers who service that industry. There would only be a handful of them. They now need to report to the ATO payments made to landlords and if those payments are not declared, it’s time for more awkward questions.
Do you have a residential or commercial property you would like us to help you claim depreciation for? Or a question about depreciation?
Order online now or call us on 1300 660 033 and rely on our 20-plus years of experience in estimating depreciation returns.
