NAT 75780-08.2021 DE-37444
2021
Tax Time
Toolkit
Investors
The 2021
Tax Time Toolkit
for Investors
Our investors toolkit is a great resource for anyone
earning money from their investments, whether
you invest in property or cryptocurrency.
While things look different this year, what hasn’t
changed is our commitment to provide further
support for all investors to lodge their returns
accurately. The resources in the toolkit provide
information to help investors keep the records
they need to prepare their returns now and in
thefuture. Getting your return right avoids costly
follow up, and rework down the track.
In addition to our rental property fact sheets
wehave expanded the topics to include
information on:
■ cryptocurrency
■ pay as you go instalments
■ capital gains tax for
– marriage or relationship breakdowns
andreal estate transfers
– inherited property
– sale of a rental property.
While we provide help and support, we also
focuson ensuring the integrity of the system and
take actions to ensure all taxpayers are paying
their fair share. This means we will continue to
review returns where we have indicators the
claims are incorrect, or income has been omitted.
We will also deal with those who choose to do the
wrong thing, which may include application of
penalties and prosecution.
Whilst this year has still had its challenges, your
tax return doesn’t need to be challenging. This
toolkit has been designed to help investors and
their agents understand their obligations and
avoid costly mistakes in their returns. I encourage
all investors and their agents to refer to this toolkit
as they complete their returns. You can access
other products we have available to assist,
suchas videos and our rental property guide
atato.gov.au/property
Adam O’Grady
Assistant Commissioner
Individuals and Intermediaries
Australian Taxation Ofce
We encourage
youtoshare this
information with your
staff,clients, members
and networks.
A helpful
directory for
tax time
The ATO has a range of information, tools and services available to help Australians prepare
andlodge their tax return every year:
■ Tax time essentials – an overview of the
essential information individuals need to
know for their tax return this year
■ Dealing with disasters – specic advice
for those affected by natural disasters
■ COVID-19 – specic advice for those
affected by COVID-19
■ What’s new for individuals – changes
tobe aware of before you complete
yourtax return
■ Do you need to lodge a tax return?
– aneasy tool to nd out if you need to
lodge atax return this year
■ How to lodge your tax return – lodge
using myTax or a registered tax agent. If
you are going to lodge your own return,
myTax is the quickest and easiest way to
lodge.
■ Rental properties (COVID-19) – specic
advice for rental property owners affected
by COVID-19
■ Residential rental properties – nd out
what you need to declare and what you
can claim for your investment property
■ Deductions you can claim – it pays to
know what you can claim at tax time
■ Occupation and industry specic guides
– guides from specic industries and
occupations to help you correctly claim the
work-related expenses you are entitled to
■ myDeductions – a useful way to keep
track of records throughout the year to
make tax time easier
■ Income you must declare – nd out what
income you must declare in your tax return
■ Calculators and tools – a range of
popular calculators and tools to help you
work out the answers to questions unique
to your tax and super circumstances
■ Correct (amend) your tax return – x a
mistake or amend your return
■ Online services – access a range of tax
and super services in one place, including
lodging your tax return, tracking the
progress of your return and making a
payment or entering a payment
arrangement
■ ATO Community – ask your tax and super
related questions over on the ATO’s online
community forum
■ Join the discussion online – keep up to
date with the latest tax and super
information on the go! Follow the ATO to
get tax tips and updates in seconds, share
information and stay informed
■ Tax Time Toolkits – full list of resources
Rental properties
repairs, maintenance
and capital expenditure
Quick reference chart
If you replace something
that is worn out, damaged
or broken as a result of
renting outyour property
This is likely to be a
REPAIR
Eg, replacing part of the
fence damaged in a storm
or ettin in apluber to
a leaintap
his should be claied
at Repair and
Maintenance on the
rental schedule
If you are preventing or
xing deterioration o
anitem tat occurred wile
renting out your property
This is likely to be
MAINTENANCE
Eg, getting faded interior
walls repainted or having
adec reoiled
his should be claied
at Repair and
Maintenance on the
rental schedule
If you repair damage
tat existed wen te property
was bought (whether it was
known about at the time of
purchase or not)
This is likely to be an
INITIAL REPAIR
, in oorboards or
repairing a broken
window that had damage
when the property was
bouht
his should be claied in
your cost base (capital
ains ta or claied at
Capital Works or Capital
Allowances on the rental
schedule
If you replace an entire
structure that is only partly
damaged, or renovate or
add a new structure
toteproperty
This is likely to be a
CAPITAL WORKS
Eg, replacing all the
fencin, not ust the
damaged portion, or
adding a carport
his should be claied
atCapital Works on
therental schedule
If you install a new appliance
or oorwindow coering
This is likely to be a
DEPRECIATING ASSET
, buyin a brand ne
dishwasher or installing
new carpet
his should be claied
atCapital Allowance
onthe rental schedule
Repairs and maintenance
The cost of repairs and maintenance may be deductible in full
intheyear you incur them if both:
■
the expense directly relates to wear and tear or other damage
thatoccurred as a result of your renting out the property
■
the property either
– continues to be rented on an ongoing basis
– remains available for rent but there is a short period when
theproperty is unoccupied for example, where unseasonable
weathercauses cancellations of bookings or advertising is
unsuccessful in attracting tenants).
Repairs
Generally, repairs must relate directly to wear and tear or other
damagethat occurred as a result of your renting out the property.
xamples of repairs include:
■
replacing broken windows
■
repairing electrical appliances or machinery
■
replacing part of the guttering damaged in a storm
■
replacing part of a fence damaged by a falling tree branch.
Maintenance
aintenance generally involves keeping your property in a
tenantablecondition. It includes work to prevent deterioration
orxexisting deterioration.
xamples of maintenance include:
■
repainting faded or damaged interior walls
■
oiling, brushing or cleaning something that is otherwise
ingoodworking condition for example, oiling a deck or
cleaningaswimmingpool
■
maintaining plumbing.
Rental properties repairs, maintenance and capital expenditure
apital expenditure wic
may be claimable over time
Capital Allowances
Depreciable assets are those items that can
be described as plant, which do not form
part of the premises. These items are usually:
■
separately identiable
■
not likely to be permanent, and expected to
be replaced within a relatively short period
■
not part of the structure.
For each asset that you claim a deduction
for decline in value, you can choose to
useeither:
■
the effective life the Commissioner has
determined for such assets
■
your own reasonable estimate of its
effective life.
here you estimate an asset’s effective life,
you must keep records to show how you
worked it out.
Examples of assets that deductions for
decline in value can be applied to include:
■
oating timber ooring
■
carpets
■
curtains
■
appliances like a washing machine or fridge
■
furniture.
Capital works
apital works is used to describe certain
kinds of construction expenditure used to
produce income.
The rate of deduction for these expenses
isgenerally . per year for years
following construction.
apital works include:
■
building construction costs
■
the cost of altering a building
■
major renovations to a room
■
adding a fence
■
building extensions such as
garages or patios
■
adding structural improvements like
a driveway or retaining wall.
Improvements
An improvement is considered anything that
makes an aspect of the property better,
more valuable or more desirable, or
changes the character of the item on which
works are being carried out.
Improvements include work that:
■
provides something new
■
generally furthers the income-producing
ability or expected life of the property
■
goes beyond ust restoring the efcient
functioning of the property.
Improvements can be either capital works
where it is a structural improvement or
capital allowances where the item is a
depreciable asset. It is important to
correctly categorise each expense you
incur to ensure it is treated correctly for
tax purposes.
Initial repairs
osts you incur to remedy defects, damage or deterioration
thatexisted at the time you acquired the property are considered
capital in nature. These costs may form part of the cost base of
theproperty for capital gains tax purposes but not generally to the
extent that capital works or capital allowances deductions have
been or can be claimed for them. The costs to make a property
suitable to be rented out are of a capital nature and not immediately
deductible. To be deductible, the necessity for repairs must have
arisen from the rental activity of the person making the claim, not
that of some previous owner.
owever, if your new property was rented or made available for
rentand has been affected by special circumstances beyond your
control, such as a natural disaster or deliberate damage by tenants,
you can claim a deduction for the cost of repairs incurred to restore
the property to its original condition.
xample
nitial repairs not deductible (existing damage)
Lisa purchased a property with the intention of renting it out.
Atthe time of purchase isa knew that she would need to
repair the roof replace all roof tiles and part of the ceiling
asthey were in a poor condition.
hen carrying out the works, isa discovered that there was
extra structural damage that required her immediate attention.
The repair to the ceiling costs her ,, the replacement of
roof tiles cost her , and the structural work cost her a
total of ,.
The initial’ repair of the ceiling of , is not deductible
butitmay form part of her cost base for GT purposes, the
replacement of the entire roof and the structural work can
beclaimed as capital works expenses.
xample 2
Repairs cost (special circumstances beyond your control)
Dimitri purchased a property with the intention to rent.
nexpectedly, after ten weeks of the property being available
for rent a heavy storm damaged the entire roof and minor
partsof the ceiling.
As the property was genuinely available for rent before
thestorm and the expenses were undertaken to restore the
property to its original condition, imitri will be able to claim
repairs cost for the ceiling and capital works deduction for
replacing the damaged roof tiles.
This is a general summary only
For more information go to ato.o.aurental
Watch our short videos at ato.o.aurentalideos
wnload our free Rental properties guide at ato.o.aurentalpropertyuide
Read our Guide to capital gains at ato.o.auctuide
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