- CPA Australia has published our 2020-21 tax tips for investors.
- COVID-19 created new tax issues for many property investors.
- Cryptocurrency gains are taxable and must be reported in your return.
COVID-19 raised tax issues which many property investors haven’t dealt with before, according to Australia’s leading professional accounting body, CPA Australia.
Senior Manager Tax Policy Elinor Kasapidis said, “Aussies love property investing. More than 2.2 million reported rental income on their tax returns in 2018-19. The past year raised new tax issues for many property investors.
“Many landlords lost rental income due to moratoriums, border closures and COVID restrictions. Unfortunately, lost rental income can’t be claimed as a tax deduction and must be copped on the chin.
“The good news is, if you reduced the rent to enable your tenants to stay in the property, this doesn’t reduce your deductions for rental property expenses.
“A fortunate few landlords received back payments or insurance payouts for lost rent. These are assessable income and must be reported in your tax return.
“Some property investors experienced financial difficulty making their mortgage payments and took up their bank’s offer of a repayment holiday. Interest on deferred loan payments can be deducted.
“Some landlords stayed at their rental property or took it off the market during lockdowns. They’ll need to adjust their expenses and depreciation claims for the period it wasn’t available for rent. Make sure you can show how the split between private and commercial use has been calculated.
“Some taxpayers have purchased their first or subsequent investment properties in the property gold rush since COVID-restrictions eased. Now is the best time to talk with a tax agent about maximising your tax deductions next year.”
Other circumstances which may affect a taxpayer’s claim are changes to property management fees and advertising during COVID.
Added to COVID-induced tax uncertainty, there’s still some confusion about changes to the tax rules for investment properties in recent years.
“Landlords can no longer claim travel deductions relating to inspecting, maintaining or collecting rent from their investment property.
“For properties acquired from 9 May 2017, landlords can no longer depreciate assets that were in the property at the time of purchase.”
“From July 2019, many investors can no longer claim deductions for vacant land, including while constructing or substantially renovating residential premises. If your business use of the land was suspended due to COVID restrictions, you may still be able to claim a deduction if the land remained available for use during this period.”
Australian taxpayers must also report foreign property investments in their Australian tax return.
“The ATO has information exchange agreements in place with foreign tax agencies. So, they’re receiving data on your overseas investments and income too.”
“The property market is also running red hot in other countries. If you sold property overseas, it’s likely you made a reportable capital gain.”
The ATO has access to new property data this income year, including property management and updated rental bond data covering millions of individuals. “The ATO can see around corners when it comes to undeclared investment property income and capital gains.
“It’s perfectly understandable that COVID may have changed your investment property deductions and expenses, just make sure you have the records to back up your claims.”
The tax rules for investment property can be complex and we recommend investors see a CPA-registered tax agent for help. “You can cut your own hair, but you’ll get a better result if you see a professional. It’s the same with completing your tax return.”
CPA Australia has around 6,000 registered tax agents. Click here to find a CPA Australia registered tax agent.
Almost one in five Australian taxpayers invest in cryptocurrency and must report any gains in their tax return.
“Millions of Australians are exploring non-traditional alternatives to shares and property to build their wealth.
“If the terms chain splits, staking rewards and airdrops mean something to you, you may need to familiarise yourself with the rules on crypto trading this tax time.”
“Like other capital losses, crypto losses are deductible against your capital gains. So, if you’ve lost money on your investment, you can deduct it from other gains you’ve made.”
Dr Jane Rennie
General Manager External Affairs
T: +61 425 869 017
E: [email protected]
New Zealand’s Inland Revenue targets tax compliance burden
IRD seeks input from tax practitioners and professional bodies as part of its bid to improve service.article
Are you an employee, contractor, investor, in business or lodging your first tax return? Check out our tax tips for 2021
Historical year-end tax resources
Resources for tax agents preparing tax returns for Australian clients for financial years before 2020
TPB review: What it means for tax practitioners
The final report of the Review of the TPB has many noteworthy recommendations but more consultation is needed on implementation.article
Tax tips for employees and contractors
Our deductions and offsets tips show you how to maximise your refund and reduce your tax liability
ATO’s data matching ramps up and focuses on SME reporting
Here’s how to ensure your clients are correctly accounting for their income and use of assets.article