The Actual Cost Method is one of the two methods available to taxpayers to claim their work from home expenses. According to the ATO, under this method, you can claim the actual expenses you incurred for items like phone, internet, and electricity while working from home. You must keep records to show you incur expenses as a result of working from home. The type of records you need to keep will depend on the method you choose to calculate your expenses.
To use the actual cost method to claim actual expenses, you must incur additional running expenses as a result of working from home and keep records or other written evidence, which shows the amount: you spend on expenses, you spend on depreciating assets you buy and use while working from home, and of work-related use for your expenses and depreciating assets.
You don’t incur additional running expenses if other members of your household (who are not working from home) are in the same room as you while you are working from home.
The ATO provides a list of expenses that can be claimed under this method. These include:
Electricity and gas for heating, cooling and lighting
Cleaning costs for your work area
Phone and internet costs
Computer consumables such as printer ink and stationery
Depreciation of home office equipment such as computers, phones and furniture
To claim your work-from-home expenses using actual costs, you must keep either a record showing:
the number of actual hours you work from home during the entire income year – for example, a timesheet or spreadsheet; or
a continuous 4-week period that represents your usual pattern of working at home – for example, a diary.
You must also keep records that show:
the additional running expenses you incurred while working from home, such as receipts, bills and other documents; and
how you worked out the amount of your deduction.
Occupancy Expenses
You may be able to claim a portion of your occupancy expenses, which includes:
Mortgage interest
Rent
Council & water rates
House insurance premiums
Occupancy expenses can generally be apportioned on a floor area basis. You must also apportion your expenses on a time basis if you only use that area of your home for work purposes for part of the year.
You must keep records for all your occupancy expenses, including:
bank statements for your mortgage interest
rental receipts
quarterly invoices for your water and council rates
invoices or receipts for your house insurance
land tax assessment notices and evidence of payment
a floor plan of your home with the floor area used when working from home clearly marked
records of time spent using the area for a purpose other than working from home
records showing how you apportioned your occupancy expenses.
Please note: claiming occupancy expenses may affect the tax-free status of your home if you sell your home in the future.
Turn Bricks into Bullion: Smart Tax Tips for Property Investors
Property investment can build long-term wealth. But without the right tax strategy, you may lose valuable returns.
The Australian Taxation Office (ATO) closely monitors rental property claims. Errors are common, and audits are increasing due to data matching technology.
Smart investors treat tax planning as part of their investment strategy. Here’s how to protect your portfolio and maximise legitimate deductions.
Key Takeaways
Declare all rental-related income, not just weekly rent.
Understand the difference between repairs and capital works.
Apportion loan interest if any portion is used privately.
Only claim expenses when the property is rented or genuinely available for rent.
Be aware of limits on second-hand depreciating assets.
Keep detailed records for at least five years.
Plan early to manage capital gains tax and cash flow.
Why Accuracy Matters More Than Ever
ATO Taxation Statistics show that a significant number of Australians report rental property income each year. At the same time, the ATO consistently identifies rental property errors in tax returns.
The ATO states it uses sophisticated data matching programs that draw information from:
Banks
Rental bond authorities
State land registries
Insurance providers
Property management platforms
This means undeclared income and incorrect claims are easier to detect than ever.
A strong compliance approach protects your wealth and reduces audit risk.
Tip 1: Declare All Rental Income
Rental income includes more than weekly rent.
You must declare:
Rent received, including advance payments
Bond money retained for unpaid rent or damage
Insurance payouts for damage or lost rent
Letting or booking fees
Tenant reimbursements
Government rebates linked to the property
If rent is paid to an agent, it is generally declared in the year the tenant pays the agent. It does not wait until the funds reach your bank account.
Keep separate records for each property. Clear documentation makes tax time smoother and safer.
Tip 2: Claim the Right Deductions — Not the Wrong Ones
Tax deductions improve cash flow. But incorrect claims are one of the most common triggers for ATO review.
Expenses Often Claimed in the Same Year
You may be able to claim:
Advertising for tenants
Agent fees
Body corporate fees
Council rates
Water charges
Land tax
Insurance
Cleaning and gardening
Pest control
Repairs and maintenance
Interest on investment loans
These must relate directly to earning rental income.
Tip 3: Repairs vs Capital Works: A Critical Distinction
This is where many investors unintentionally over-claim.
Repairs fix damage or wear and tear. These are generally deductible in the year incurred.
Capital works improve the property’s structure or value. These are claimed over time.
For example:
Fixing a leaking tap is a repair.
Replacing an entire kitchen is likely capital works.
Capital works deductions are generally claimed at 2.5% per year over 40 years. In some circumstances, a 4% rate over 25 years may apply.
Claiming improvements as immediate repairs can attract ATO attention.
Think of repairs as polishing gold. Improvements are forging new gold bars, claimed gradually.
Tip 4: Interest Deductions Must Be Apportioned
Loan interest is often your largest deduction. But it must be calculated carefully.
If part of your loan is used privately, you must apportion the interest.
For example:
If you redraw funds for a personal expense, that portion becomes private.
Interest on that amount is not deductible.
This rule continues for the life of the loan. Refinancing does not remove the need to apportion.
Claiming 100% interest when private use exists is a common mistake.
Tip 5: The Property Must Be Genuinely Available for Rent
You can only claim deductions when the property is rented or genuinely available for rent.
A property may not be considered genuinely available if:
It is advertised in limited ways
It is listed at well above market rent
You impose unreasonable tenant conditions
You repeatedly refuse suitable tenants
Holiday homes and mixed-use properties require careful apportionment. Private use periods reduce deductible expenses.
If a property is mainly held for personal use, deductions may be denied.
Tip 6: Depreciation: Watch the Second-Hand Asset Rules
Depreciation can be valuable, but strict rules apply.
In most cases, residential property investors cannot claim depreciation on second-hand depreciating assets. This applies unless specific exceptions are met.
However, capital works deductions may still apply to structural elements.
This rule catches many investors off guard. A depreciation schedule prepared by a qualified professional can provide clarity.
Tip 7: Not All Costs Are Immediately Deductible
Some expenses must be claimed over time, including:
Borrowing expenses
Capital works
Structural improvements
Certain initial repairs
Stamp duty and loan repayments are not deductible. Only the interest component is deductible.
Each scenario affects cash flow and future planning.
A strategic approach transforms property from a simple asset into a refined wealth engine.
Avoiding Common ATO Triggers
The most common errors include:
Over-claiming repairs
Incorrect interest claims
Claiming deductions during private use
Failing to declare all income
Poor record keeping
Think of your tax return as a gold assay test. If it does not withstand scrutiny, value can quickly erode.
Accuracy is your strongest safeguard.
Ready to Turn Property into Solid Gold?
Tax for property investors is complex. The ATO’s data-driven compliance approach makes getting it right essential.
We help property investors:
Maximise legitimate deductions
Structure loans correctly
Plan for capital gains tax
Avoid costly compliance mistakes
Build sustainable, long-term wealth
If you want clarity and confidence with your investment property tax strategy, we would love to help. Contact us today and let’s turn your property portfolio into solid gold.
The ATO has announced the commencement of a data-matching program for property investors. This is in order to acquire residential investment property loan data from authorised financial institutions.
Sample audits conducted under the ATO random enquiry program, indicated a net tax gap of $9 billion for the 2019–20 income year. This was attributable to incorrect reporting of rental property income and expenses.
A significant driver of the gap was incorrect apportioning of loan interest costs. This happened where the loan was refinanced or redrawn for private purposes.
Data matching and tax compliance
The ATO will use the data to ascertain information about rental property loans, such as; repayments, interest charges, and borrowing expenses. This information will be used to identify, assess and treat several tax compliance matters, including:
Lodgment – confirming that taxpayers with rental properties are lodging tax returns and the relevant rental property schedule on or before the relevant due date;
Income tax – confirming taxpayers with a rental property are correctly reporting interest on the loan and borrowing expense deductions in their rental property schedules and associated income tax return labels;
Capital gains tax (CGT) – confirming the calculation of cost base elements used to determine the net capital gain or loss on a rental property used to generate income.
After a return is lodged, the ATO will use the data collected to identify relevant cases for action. This includes compliance activities and education strategies.
If a discrepancy is identified, taxpayers will be contacted by phone, letter, or email. Taxpayers will then have 28 days to respond before the ATO takes any action in relation to the discrepancy.
Other matters
ATO’s residential investment property loan data matching program will run from 2021–22 to the 2025–26 income years.
The data collected by the ATO will be made available to tax professionals through pre-filling reports in Online services. This is available to agents and practitioner lodgment service (PLS) through standard business reporting (SBR) enabled software.
Individual self-preparers may also access the data collected by the ATO through myTax. Specifically, the rental property schedule interest on loans or borrowing expense labels and rental income tax return labels.
Should you have any queries in relation to this program and its operation, please feel free to contact our office.
Whether you have a trust set up for investment or business purposes, there are some common elements to getting ready for the trust’s tax return.
Contrary to popular opinion, a trust is not actually a legal entity; instead, it is a formal relationship between other entities, where one entity holds property for the benefit of another entity, which could be a business or individual.
Because a trust is not a person or business entity, its income is usually taxed differently, although this depends on the setup and type of the trust. But even though the tax return is different, many other administrative aspects are the same as for any taxpaying entity.
Trust Administration
One of the most important administrative tasks to attend to is to hold a formal meeting before midnight on 30 June each year to document the basis of distributions to beneficiaries.
If you haven’t already done this for the 2023 financial year, talk to us as soon as possible so we can check your accounts and advise you on the best arrangements for beneficiary distributions.
Record Keeping
The other essential element of trust administration is record keeping. Although a trust may not be a legal taxpaying entity like a person or business, all records related to income and expenses must be kept for five years after lodgement of the income tax return.
Particularly important are records for any property owned by the trust. If a trust owns multiple properties, you must separate income and expenses according to each property.
If the trust earns income from overseas interests or investments, all these records must also be kept.
Capital gains, interest earned, and dividends received must also be documented.
The trustee must keep records of the trust deed, contact details, trustee resolutions, statements of assets and liabilities, all business contracts, and all records relating to wages and superannuation for employing trusts.
Trust Management
Trust management can be complex but well worth the time spent keeping good records to maintain asset protection, streamline the tax return process, and maximise the allowable tax deductions.
We’ll help with record keeping, managing investments, checking trust deed compliance, and simplifying the administration. And remember, the ATO has changed the rules around distributions, so we’ll advise you about the best way to allocate income to beneficiaries.
Talk to us now and start preparing for your next trust tax return.
A self-managed superannuation fund (SMSF) gives you control and flexibility over making investments and preparing for retirement.
It’s essential to get your deductions and record keeping right for the SMSF audit process and the tax return, as strict laws govern SMSFs.
An SMSF must be set up as a trust and have a legal document called a trust deed. A super fund trust is set up for the sole purpose of providing retirement benefits to its beneficiaries. The trust deed governs how the fund is set up and how it will operate and must be used in conjunction with the superannuation laws.
There are many different investment strategies for SMSFs according to the fund’s trust deed and operations.
Common Tax Deductions
Deductible expenses for SMSFs vary according to the nature of investments and the trust deed; however, some general expenses apply to most funds.
Operating expenses include management and administration, audit, and ASIC annual fees.
Investment-related expenses include interest, investment advisory fees, costs of servicing and managing investments, property fees, and brokerage fees.
Tax-related expenses, such as preparing the SMSF annual return.
Legal expenses, including amending trust deeds.
SMSF statutory fees and levies.
Insurance premiums for death, total and permanent disability, terminal illness, and income protection.
The tax deductibility rules for SMSFs differ from those for individuals and businesses. Many people are used to claiming deductions for certain things in business or property investment and find they don’t apply to SMSF tax returns. We can help clarify what’s deductible and what’s not.
Expenses must relate to the super fund’s sole purpose being to provide its members’ retirement benefits. There may be some items you want to query with us for the audit and tax return to see if they meet the sole purpose test, such as investment training courses, collectibles and artwork, travel expenses, or personal computers.
SMSF Annual Return and Records
Once the formal audit of the SMSF has been completed, the annual return must be lodged with the ATO. The annual return is not only a tax return but also reports regulatory information and member contributions. You must keep all records relevant to the annual return.
Keep all transaction, tax, accounting, and financial reporting records for at least five years.
Keep all records relating to trustee meetings, minutes, investment strategies, and appointments or changes of trustees for at least ten years.
Make Your SMSF Management Easy
SMSF management can be time-consuming. We can help with researching and managing investments, checking trust deed compliance, setting investment strategies, keeping records, and conducting the audit.
Talk to us now and get ahead for your next annual SMSF return.
Are you claiming all the small business tax deductions that you are entitled to?
Common Tax Deductions for Small Business
There are many expenses common to most small businesses, and there are other expenses specific to the nature of each industry and the goods or services your business provides.
Operating expenses include accounting, administration, advertising and marketing, office premises, office running expenses, trading stock, legal fees, repairs and maintenance, insurance, and vehicle expenses.
Employment expenses include salary and wages, fringe benefits, superannuation, and training costs.
Other operating expenses may include things specific to your business, for example, point of sale systems, freight, professional membership fees, professional education, protective equipment, tools, or specialised software.
Capital expenses include machinery and equipment, vehicles, furniture, and computers. Depreciation for these assets may also be deductible if the expense was not claimed immediately.
Expenses must relate to running the business and providing the goods or services your business offers.
Some common expenses that are not deductible are fines and penalties, provisions for employee leave, donations to entities not registered as deductible gift recipients, and some entertainment. Super and PAYGW are tax deductible when they are paid on time – but not if paid late!
There may be some expenses you want to check with us, such as private usage of business vehicles or other equipment, prepaid expenses, bad debts, loss of stock, and borrowing expenses. We’ll make sure to include all the deductions you’re entitled to.
What’s on the ATO Radar for Business Tax Returns?
Businesses whose benchmarks fall significantly outside the ATO’s small business benchmarks.
Work-related travel expenses – travel fares, accommodation, meals. The travel should be directly related to income-producing activities; you need records to verify the travel claims.
Motor vehicle expenses – keep records for fuel, repairs and servicing, finance arrangements, insurance, and registration. Keep a logbook to record private travel.
Fringe benefits – have you reported all benefits provided to employees?
Superannuation – have you paid the superannuation guarantee on time to employees’ super funds? The ATO will examine your Single Touch Payroll records, including superannuation payments.
Instant asset write-off – the threshold remains at $20,000 this year, but there are rules about eligibility, so talk to us to see if the asset deduction claims apply to your business.
Maximise Your Business Deductions
Remember to keep all your business records for at least five years and payroll records for at least seven years. Companies must keep all records, including director meeting minutes, for at least seven years.
We’ll ensure you have time to plan for a tax bill, or if you are due a refund, you’ll get it within ten days of us lodging your tax return.
We’ll also check your business’s eligibility for concessions, offsets, incentives, and rebates and make sure your business is calculating taxable income correctly so you don’t pay more tax than you need to.
Contact us when you are ready. We’re here to help.
