With some research, preparation and expert advice, smart property investors can turn an ordinary tax return into one that will help kick off the new financial year with a smile.

Claim every allowable expense

There are around 20 expenses you can claim as tax deductions, including interest on loans, advertising for tenants, phone calls, cleaning, body corporate fees, legal fees and water charges. Refer to the Australian Taxation Office website for a detailed list.

You can only claim deductions for the period during the year that the property is rented or available for rent. If the total borrowing expenses are $100 or less, you can claim a full deduction in the income year they are incurred.

It’s difficult to remember every expense you incurred over a year if you don’t keep accurate records. Detailing your income and expenses as they happen rather than waiting until year end will save considerable time and hassle at tax time.

Take advantage of immediate write-offs

Items bought for your property that cost $300 or less can be claimed as an immediate tax deduction. This isn’t the case if the item is part of a set that costs more than $300 (e.g., set of four chairs).

Understand low value pooling

Depreciating assets valued at less than $1,000 can be grouped into a single low value pool and depreciated together. This means you only need to do one annual calculation for the depreciation of all the assets in the pool.

For any other assets, you work out the depreciation using the asset’s effective life. For example, an oven worth $1,500 can be used for 14 years, so you could claim a deduction of $107 per year for 14 years.

Seek expert advice on depreciation

Residential rental properties built after 17 July 1985 are eligible for depreciation on construction costs, as are some properties built before this date that meet certain criteria. As the rules and conditions can be confusing, it’s well worth seeking the advice of a quantity surveyor who can draw up a depreciation schedule.

Know the difference between repairs and capital improvements

The expenses of repairs/maintenance can be claimed back straight away, but capital improvements have to be depreciated over a number of years. For example, you can claim an immediate deduction for the cost of replacing part of a fence damaged by a fallen tree, but not if you replace the whole fence because it is old. The new fence would be categorised as an improvement, which you can normally claim at 2.5% a year for 40 years from the date construction was completed