Why you should start preparing your property tax return now

By Matthew Harris | April 2, 2020 | 5 Min read

Correctly preparing your rental property’s tax return can be stressful and time consuming if you leave it to the last minute.

Rush it and you could also risk errors that will attract the attention of the IRD, or even cause your return to be filed late and incur a fine.
If you take time throughout the year to ensure you understand what’s required, record your expenses correctly, and seek help from an expert, your return should be a breeze. To get you started, here are a few key things you could do right now.

Record all expenses

The best thing you can do for your next tax return is to start correctly recording and documenting all your expenses right now. If you don’t have a record of these from throughout the year, it could take days to gather everything up when you finally get around to it.

Examples of expenses you can claim include:

Get a grip on depreciation

Depreciation is an allowance you can claim that reduces your taxable income to account for the wear and tear of the fittings you’ve bought for your rental. This only applies to the removable assets inside the home, not the property or land itself. If your fittings/assets are worth less than $5,000, you can lump them all together rather than depreciate them separately to make it easier.

Unfortunately, depreciation can be a little confusing to work out. There are a couple different methods for calculating it and each asset type has its own depreciation rate, so it’s best to seek help from an experienced property accountant as soon as possible if you’re unsure.

Understand mixed-use assets

If you use your property as well as renting it out then you need to be familiar with the mixed-use asset rules.

If you rent out a house or room within your home: You can claim any expenses relating to the rental of the room and a portion of general expenses like mortgage interest while the room was rented out. To work this portion out, calculate the size of the room as a percentage of the total property area, then claim that percentage of general expenses.

If you rent out a holiday home that you also use sometimes: If you rent out your holiday home for part of the year, that income is taxable. To calculate your expenses:

Add this amount to fully deductible expenses and you’re on your way.

Find the right help

If you’re still feeling lost, don’t panic. Investment property tax can be confusing and the processes can take a long time if you’re not familiar with them.

To make sure you’re sorted well in advance of the end of the 2020 tax year, give the expert team at PTR Accountants a call and we’ll make it easy for you.

Insights & Advice

Unwelcome News for Property Investors

On 23 March 2021, the Government made an unexpected and unwelcome announcement.

Learn more

9 tips to master your money and have the financial future you desire

As Money Week comes to an end, here are our 9 top tips to secure your financial future.

Learn more

Small Business Cashflow Loan Scheme

Late last week the Government released some details about a new Small Business Cashflow Loan scheme which will be available for businesses as part of the Covid-19 response package.

Learn more