Rental Property Deduction Do’s & Do Not’s

Owning a rental property can be a great way to build wealth, but it also comes with a range of tax responsibilities.

As a landlord, understanding what you can and can’t claim as a deduction is key to maximising your return while staying on the right side of the ATO.

The Australian Taxation Office (ATO) has clear guidelines around rental income and allowable deductions. Here’s what you need to know:

Declare All Rental Income

Before diving into deductions, it’s important to understand that all rental-related income must be declared. This includes:

  • Rent received from tenants
  • Rental bond money retained (e.g. for damage or unpaid rent)
  • Insurance payouts related to the rental
  • Reimbursements for expenses (like water or electricity)
  • Government rebates or grants
  • Income from short-term rental platforms (such as Airbnb or Stayz) 

Whether you’re renting out a property long-term or casually letting it during holidays, income must be reported in your tax return for the year it was received.

What Can You Claim as a Deduction?

Here are some of the most common deductible expenses landlords can claim:

  1. Interest on Loans – You can claim the portion of interest paid on your loan used to purchase, renovate, or maintain the property (but not the principal).
  2. Council Rates and Water Charges – If you pay these costs as the landlord, they are deductible.
  3. Repairs and Maintenance – Costs for fixing damage or wear and tear from tenants are deductible. However, improvements or renovations are treated differently.
  4. Property Management Fees – Including agent commissions, advertising for tenants, and legal expenses related to leases.
  5. Depreciation – On eligible assets like appliances, carpets, and hot water systems, using a quantity surveyor’s depreciation schedule.
  6. Insurance Premiums – Including building, contents, and landlord insurance.
  7. Travel Costs – If you incur travel costs for inspections or maintenance, these are no longer deductible for most individuals from 1 July 2017 (with some exceptions for corporate landlords).
  8. Pest Control, Cleaning, and Gardening – Necessary upkeep expenses can be claimed, provided they are directly related to the property’s rental.

Be Careful with Capital Works and Improvements

It’s important to distinguish between repairs and capital improvements. While repairs can be claimed immediately, improvements—like replacing a kitchen or adding a deck—must be claimed over several years through capital works deductions. This is a common area where landlords get tripped up.

Part-Year or Private Use? Adjust Accordingly

If the property was only rented for part of the year or used personally at any time, you can only claim deductions for the portion of the expenses that relate to the rental period. Likewise, if you rent out part of your home (e.g. a room or granny flat), you must apportion expenses fairly.

Keep Records

To back up your claims, keep detailed records of all income, expenses, contracts, and receipts. The ATO requires records to be kept for at least five years, and being able to substantiate claims is crucial in the event of an audit.

By understanding your obligations and entitlements, you can make your investment work harder for you—both at tax time and over the long term. Speak to your accountant to ensure your rental property deductions are accurate, compliant, and fully optimised.

Div 7A: Facts Or Fictions?

When it comes to private company loans, Division 7A of the Income Tax Assessment Act 1936 plays a critical role in ensuring shareholders or associates don’t receive tax-free distributions disguised as loans. However, there are common misconceptions about how Division 7A operates—and attempts to sidestep it can easily backfire.

Myth 1: I can temporarily repay my loan before the company’s lodgment day to avoid Division 7A.

Fact: If you repay a loan and then reborrow a similar or larger amount from the same private company, that repayment may be ignored for Division 7A purposes. The law is designed to prevent “round-robin” arrangements where repayments are not genuine. Essentially, you can’t cycle funds in and out of the company just to appear compliant.

Similarly, using the company’s own funds to make a repayment also doesn’t count. If the money used to make the repayment originated from the same company, it defeats the purpose of genuine debt reduction.

Myth 2: I can use company money in my mortgage offset account and repay it later without tax consequences.

Fact: This type of arrangement—where money is borrowed from a private company and placed in a personal mortgage offset account, only to be repaid and reborrowed in a continuous cycle—has clear tax implications under Division 7A. A reasonable person would view this as a premeditated plan to repeatedly borrow and repay funds to generate a tax benefit.

In such cases, the repayments are disregarded, and you are considered not to have repaid the loan by the company’s lodgment day. As a result, the amount can be treated as an unfranked dividend, meaning it’s assessable income without the benefit of franking credits.

Myth 3: If a company’s liabilities exceed its assets, its net assets for Division 7A purposes will be negative.

Fact: Not true. In calculating the distributable surplus for Division 7A, net assets cannot be negative. Instead, if a company’s assets do not exceed its legal obligations and specific provisions, the net asset amount is considered to be zero, not a negative number. This impacts whether a Division 7A deemed dividend can be assessed.

Understanding Division 7A’s rules is essential to avoid unintended tax consequences. Attempting to sidestep the legislation with creative loan strategies is not only ineffective—it can lead to significant penalties.

How to Prove Work-Related Use of Your Phone When Working from Home

If you’re working from home and plan to claim a deduction for your phone and internet expenses, it’s important to understand how to correctly calculate and support your claim—especially if you’re using the actual cost method.

Under the fixed rate method, phone and internet usage is already included in the hourly rate, so you can’t claim these costs separately. However, if you opt for the actual cost method, you’ll need to determine the work-related portion of your phone and internet use to claim it as a deduction.

The simplest and most practical way to do this is by keeping records over a continuous 4-week period. This can be done through a spreadsheet, diary, or app that captures details like:

  • The number of phone calls made for work 
  • The amount of time spent on the internet for work-related activities versus personal use 

Once you’ve worked out your work-related percentage over that 4-week period, you can apply that percentage across the rest of the income year, as long as your usage patterns remain consistent.

For example, if you determine that 60% of your phone and internet use is for work during your 4-week tracking period, you can apply that percentage to your annual phone and internet costs to calculate your deduction.

Keeping clear records not only helps you get the deduction you’re entitled to, but also ensures you’re protected in the event of a tax review. It’s a small effort that can lead to meaningful tax savings.

If you’re unsure which method is right for your situation or need help calculating your actual usage, don’t hesitate to speak with your accountant.

Preparing Your Tax Return? Make Sure You Know What You Can Claim…

As the 2025-26 financial year kicks off and the 2024-25 ends, it heralds the start of another tax season of receipt-chasing, deductions and paperwork.  

Whether you’re lodging your return early or waiting until the October deadline, understanding what you can legally claim as a tax deduction can make a real difference to your refund or your bill.

As accountants, we know how easy it is to overlook deductions or make assumptions that don’t align with current ATO rules. That’s why seeking professional advice can be invaluable. Below, we break down some of the key deductions that may apply to you this year.

  1. Work-Related Expenses

If you incur expenses as part of earning your income, you may be able to claim them — but they must be directly related to your job, and not reimbursed by your employer. Some commonly claimed deductions include:

  • Home office expenses: With hybrid and remote work now the norm for many, you may be eligible to claim a portion of your electricity, internet, and depreciation of office equipment. For 2024–2025, the ATO continues to allow the fixed rate method (currently 70c/hour), but accurate records of hours worked from home are essential.
  • Tools, uniforms, and protective gear: If your job requires a specific uniform, protective clothing, or tools, you may be able to claim these costs — including laundry expenses for eligible workwear.
  • Education and training: Courses that directly relate to your current job (not a new career path) may be deductible, including fees, textbooks, and travel.

2. Vehicle and Travel Expenses

If you use your personal vehicle for work-related travel (excluding your usual commute), you may be able to claim a deduction. The cents-per-kilometre method remains popular, with the 2024–2025 rate set at 88 cents per km. Keep a logbook or detailed diary to support any claim.

Note: Travel between home and work is generally not deductible unless you’re carrying heavy tools or moving between worksites.

3. Donations and Gifts

Did you donate to a registered charity this year? Donations of $2 or more to organisations with Deductible Gift Recipient (DGR) status are claimable — just make sure you have a receipt.

4. Cost of Managing Tax Affairs

Fees paid to a registered tax agent or accountant to prepare and lodge your return are tax-deductible. This includes associated costs like travel to your accountant or subscriptions to tax-related publications.

5. Investment-Related Deductions

If you earn income from shares, rental properties, or managed funds, there are a range of deductions you may be entitled to, including:

  • Interest on loans used to invest
  • Management fees
  • Accounting advice
  • Repairs and maintenance for rental properties
  • Depreciation on eligible assets (like appliances or furniture)

Keep in mind that deductions must relate to the period the property or investment was generating income, not just held for future gain.

Why Getting Professional Help Matters

The ATO’s data matching capabilities are stronger than ever, and simple errors — such as claiming deductions without proper substantiation — can trigger audits or delays. 

While tax software has become more accessible, it can’t always replace the tailored advice and strategic insight of an experienced accountant.

At tax time, every dollar counts. We’ll help you:

  • Maximise your eligible deductions
  • Avoid costly mistakes or red flags
  • Plan for the year ahead (especially if you’ve had changes in work, income, or investment strategy)

The tax rules change frequently, and what was deductible in the 2023-24 financial year may not be in the 2024-25 year.

For peace of mind — and potentially a better outcome — contact our team to schedule your tax return appointment today.

Global Interest Charges Change Will Affect Businesses With Outstanding Tax Debts – Here’s How

It’s crucial to be aware of significant changes affecting businesses with outstanding tax debts. 

Effective from 1 July 2025, the Australian Taxation Office (ATO) will no longer allow the deductibility of General Interest Charges (GIC) incurred on or after this date. 

What This Means for Your Business

Previously, businesses could claim a tax deduction for GIC applied to overdue tax liabilities. From 1 July 2025, any GIC incurred—currently at an annual rate of 11.17%, compounded daily—will not be tax-deductible. This change increases the real cost of carrying tax debt, as the interest will now be a non-deductible expense.

Action Steps to Consider

  • Settle Outstanding Debts Promptly: If your business has overdue tax liabilities, these need to have been paid before 30 June 2025 to ensure any associated GIC remains deductible.
  • Establish Payment Plans: If immediate full payment isn’t feasible, consider setting up a payment plan with the ATO. While GIC will still accrue, a structured plan can help manage cash flow.
  • Explore Alternative Financing: Consult with financial advisors about refinancing options. Interest on business loans used to pay tax debts may still be deductible, potentially offering a more favourable financial outcome.
  • Seek Professional Advice: Consult with your accountant or tax advisor to discuss your specific situation and develop a tailored strategy that aligns with your business’s financial goals.

If you have any questions or would like additional information, speak with your licensed tax or business adviser – we’re here to help.

Family Trust Distributions & Their Tax Obligations

If your business operates through a family trust, it’s important to stay informed about how trust distributions are taxed, especially as we approach the end of the financial year. 

The ATO continues to monitor trust distributions closely to ensure they align with tax law and are not used to avoid tax.

Here are our tips for avoiding a red flag with your family trust distributions:

Distributions Must Reflect Genuine Entitlements

When your trust makes a distribution, it must go to a beneficiary who is genuinely entitled to it, not just on paper, but in practice. If income is appointed to someone but they don’t receive the benefit (for example, if another family member retains the funds instead), this could raise red flags with the ATO.

In particular, the ATO is focusing on arrangements that attempt to divert trust income to beneficiaries on lower tax rates, while the economic benefit goes elsewhere. These arrangements may fall under anti-avoidance provisions and could lead to additional tax, interest, or penalties.

Documentation Is Key

To remain compliant, ensure your trust deed allows for the distribution you intend to make, and keep good records that demonstrate beneficiaries are receiving their entitlements.

Minutes documenting trustee decisions, bank transactions, and any formal agreements between family members should be accurate and up-to-date.

Plan Ahead

Before finalising any trust distributions for the year, speak with your accountant or tax adviser.

It’s essential to evaluate the tax implications of each distribution and determine whether your current trust structure continues to serve its intended purpose.

Family trusts remain a valuable tool for managing assets and distributing income, but they must be utilised responsibly and in accordance with the law.

If you’d like guidance on the best way to manage your trust’s distributions this year, we’re here to help.

The Deductions A Tradesperson Can Claim Vary – But Here’s What They Have In Common

When tax time rolls around, it’s important to know what you can claim to ensure you’re getting the most out of your tax return.

As a tradesperson, you’re entitled to claim a range of work-related expenses that can help reduce your taxable income.

Let’s break down some of the key deductions you can make to keep more money in your pocket.

  1. Tools and Equipment

If you’ve bought tools or equipment for your job, you can claim these expenses on your tax return. This includes everything from power tools to smaller items like hammers and wrenches. You can claim an immediate deduction for tools that cost $300 or less, while more expensive items need to be depreciated over their useful life. Remember, the tools you’re claiming must be directly related to your work.

  1. Protective Clothing and Safety Gear

Safety comes first on the job, and the good news is that you can claim the cost of protective clothing and gear. This includes items like steel-capped boots, hard hats, high-visibility clothing, and gloves. If you need to buy sun protection like sunscreen, sunglasses, or hats for outdoor work, these can also be claimed. Just make sure the gear is essential for your work and not for personal use.

  1. Vehicle and Travel Expenses

As a tradie, you probably rely on your vehicle to get to job sites, carry tools, and transport materials. You can claim a deduction for vehicle expenses if you use your car for work-related travel. This includes trips between job sites or when transporting bulky tools that can’t be securely stored at your workplace. There are two ways to claim: using the cents-per-kilometre method or by keeping a logbook to track actual expenses. Remember, you can’t claim for the normal commute between your home and regular workplace.

  1. Work-Related Courses and Training

Keeping your skills sharp is crucial in the trades, and any work-related courses or training you undertake can be claimed on your tax return. Whether it’s a first aid course or a certification that helps you do your job better, the costs can be deducted. Just make sure the training is directly connected to your current job and not for a new career.

  1. Union Fees and Licenses

If you’re a member of a trade union or professional association, you can claim the cost of your membership fees. Additionally, if you need to renew licenses or certifications for your trade, these costs are also deductible. This includes items like electrical licenses, plumbing certifications, or white card renewals.

Tax time doesn’t have to be stressful for tradies. Knowing what you can claim can maximise your tax return and keep more of your hard-earned money.

From tools and protective clothing to vehicle expenses and training costs, there are plenty of deductions available.

Keep good records of your expenses throughout the year, and don’t hesitate to contact a tax professional if you need help.

Closely Held Employees & How To Report Them On Your STP

Small businesses, especially family-run ones, require careful attention to payroll for closely held employees, such as family members, directors, and shareholders.

The Australian Tax Office (ATO) mandates that all employers adhere to Single Touch Payroll (STP) reporting requirements regardless of the employee’s relationship to the business.

However, small businesses with fewer than 19 employees have some flexibility in how they meet these obligations. In many cases, small businesses may also have closely-held employees.

Understanding Closely-Held Employees

Closely held employees are individuals directly related to the business entity from which they receive payments. This category typically includes:

  • Family members working in a family business
  • Directors or shareholders of a company
  • Beneficiaries of a trust

For small businesses, closely held employees are part of the team, but how you manage their payroll might differ from that of other employees.

STP Reporting Obligations

STP reporting is mandatory for all employees, including closely held payees. The main difference lies in the flexibility small businesses offer in reporting this information. You can choose to report the pay of closely held employees in one of two ways:

  1. With Each Pay Period: Just as you would for regular (arm’s length) employees, you can report the payroll information for closely held employees on or before each payday.
  2. Quarterly Reporting: You can also opt to report this information quarterly. This option might be more convenient for small businesses that prefer a less frequent reporting schedule.

However, for arm’s length employees – those who are not closely related to the business owner – STP reporting must be done on or before each payday without exception.

Deciding the Best Approach for Your Business

Choosing between quarterly and regular reporting depends on what works best for your business.

Quarterly reporting might be a practical solution if your closely held employees have irregular pay schedules or if managing weekly or fortnightly reports feels burdensome.

On the other hand, some businesses may prefer to keep all payroll processes uniform, opting to report both closely held and arm’s length employees together during regular pay periods.

Regardless of the chosen approach, it’s essential to maintain accurate records and ensure that all reporting is timely. This not only helps in staying compliant with ATO requirements but also avoids potential penalties.

Other Payroll Obligations

While STP reporting is a significant part of payroll management, don’t overlook other obligations.

For example, businesses must avoid pay secrecy practices and ensure transparency in how wages are determined and reported.

Additionally, maintaining up-to-date records and ensuring fair pay practices are vital responsibilities that all employers should uphold.

While managing payroll for closely held employees in a small business comes with specific requirements, the flexibility in reporting can be adapted to suit your business needs.

By understanding your obligations and choosing the best reporting method, you can ensure smooth and compliant payroll management for your closely held employees. Speak with your tax adviser to ensure you are meeting your obligations and prepare for a smoother journey with your small business.

Overwhelmed By Tax? Learn About What’s Expected For You…

As you dive into your career in your 20s and 30s, taxes can seem a bit overwhelming.

However, understanding how taxes work is key to managing your finances and ensuring you’re on the right track.

Let’s break down some vital tax concerns for young professionals like you so you can feel confident when tax season rolls back around.

1. Understanding Your Tax Bracket

One of the first things to understand is your tax bracket, which determines how much tax you pay based on your income. In Australia, the more you earn, the higher your tax rate.

For example, you won’t pay any income tax if you’re just starting out and earning under $18,200. But as your income grows, your tax obligations will increase too.

Knowing where you stand is important so you can budget effectively and avoid surprises.

2. Claiming Deductions

One of the perks of working is that you can claim deductions to reduce your taxable income. This means you could pay less tax, keeping more money in your pocket.

Common deductions include work-related expenses like uniforms, tools, and travel costs. If you’re working from home, you can also claim a portion of your home office expenses. Keep receipts and records of work-related spending—these will be handy at tax time!

3. Managing Your Superannuation

Superannuation, or “super,” is a big part of your financial future, even if retirement is a lifetime away. Your employer should contribute to your super fund, but it’s also worth considering if you want to make additional contributions.

Extra contributions can be smart because they’re taxed at a lower rate than your regular income. Plus, money will grow, setting you up for a more comfortable retirement.

4. Filing Your Tax Return

Filing your tax return might seem daunting, but it’s pretty straightforward once you get the hang of it. Most of your income details, like your salary and super contributions, are automatically populated by the Australian Taxation Office (ATO).

All you need to do is review the information, add any deductions, and submit your return. If it still feels overwhelming, don’t hesitate to contact a tax professional—they can help you ensure everything is accurate and that you’re getting the best possible refund.

5. Saving for the Future

As you earn more, you might be in a position to start saving for bigger goals, like buying a home. In Australia, certain incentives are designed to help with this, like the First Home Super Saver Scheme, which allows you to save for a house deposit within your super fund. Knowing about these options early can help you plan better and make the most of your hard-earned money.

Navigating taxes in your 20s and 30s doesn’t have to be stressful. By understanding your tax bracket, claiming deductions, managing your superannuation, and filing your tax return correctly, you can take control of your finances and avoid any tax time headaches.

You’re not alone in this, though, as there are plenty of resources and professionals who can help you. Why not start a conversation with us to find out how we can assist?

FBT Considerations For Employers

Fringe Benefits Tax (FBT) is a significant aspect of tax compliance for employers in Australia.

It applies to the non-cash benefits employers provide to their employees in addition to their salary or wages. Understanding and managing FBT obligations is crucial for businesses to avoid penalties and ensure tax efficiency.

The FBT year runs from 1 April through to 31 March, with returns needing to be lodged by 21 May.

Common Fringe Benefits

Employers may provide employees with fringe benefits as an additional incentive to their employment. These may include:

  • Car Benefits: Providing a car for private use is common and requires careful FBT calculation using the statutory formula or operating cost methods.
  • Entertainment: Meals, events, and other entertainment expenses can attract FBT; it is crucial to distinguish between deductible and non-deductible expenses.
  • Housing/Accommodation: Benefits like housing or accommodation payments are subject to FBT, and their taxable value is influenced by factors such as location and market value.

Exemptions and Concessions

  • Benefits like work-related portable devices, minor benefits under $300, and certain remote area benefits may be exempt or attract reduced FBT.
  • Non-profit organisations may qualify for FBT concessions, such as the $30,000 exemption cap for public benevolent institutions.

Employee Contributions

Employees can reduce FBT liability by contributing towards benefits, such as paying part of a company car’s running costs.

Salary Packaging

Offering salary packaging can be tax-effective for employees but increases FBT obligations for employers. Proper structuring is key to minimizing FBT impact.

Common Pitfalls

  • Underestimating FBT: Miscalculating or failing to identify fringe benefits can lead to penalties.
  • Inadequate Documentation: Poor record-keeping complicates FBT reporting and substantiating exemptions.
  • Misclassifying Benefits: Incorrect classification of benefits, such as confusing entertainment expenses, can result in unexpected FBT liabilities.

FBT requires careful management and understanding to ensure compliance and avoid costly errors.

Employers can effectively manage their FBT obligations by staying informed about the types of benefits subject to FBT, exemptions, and proper reporting practices.

Consulting with a tax professional is recommended to navigate the complexities and make informed decisions when offering employee benefits.