What Tax Records Property Investors Must Keep For CGT
The old adage “no job is finished until the paperwork is done” is never truer than when tax returns are concerned. Prospective investors in rental property are often unaware of how arduous and time-consuming it is to keep paperwork in order; however losing track of relevant documents can land them in trouble when tax time comes. Mr Matthew Mousa, property tax expert at TLK Partners, discusses the importance of keeping documents to support Capital Gains Tax and other claims.
What kind of records do you need to keep?
Rental Expenses: All records must be in English, or a language easily translatable into English. Every invoice from suppliers, be it for goods or services, must display a description of the goods or services supplied, who supplied it, the amount of the expense, and the dates on which the supply was made, the document issued, and the payment made. If it doesn’t show the date of the payment, which often happens in this digital age, a bank statement, or similar documentation, can be used to show the date of the payment.
Rental Income: To back-up any statement of rental income made from an investment property, owners need to keep all the leases that were signed with tenants, and the records of every bit of rent paid.
Other documents: These include loan agreements, land tax assessments, and bank statements. And if an owner makes use of a property manager, all the records emanating from those managers should be kept.
How long do I have to keep the records?
Although records needn’t be included with a tax return, paperwork needs to be kept for 5 years, in case there is a dispute arising out of any of the tax returns. “If a dispute with the tax man does occur, you need to hold onto all documentation until the spat has been resolved, even if the five year period has expired before it is sorted out,” Matthew says.
Record keeping for capital gains tax
It doesn’t end there either. “A large number of the records you keep for your yearly tax return should also be kept for the dreaded ‘Capital Gains event’ that happens when you sell your property,” he explains. “You also have to keep the records for 5 years after the ‘event.’”
There are, however, additional records that have to be kept in case the property is sold, that might not be among those kept for yearly tax purposes. These include the date on which the property was acquired, and the date it was disposed of.
“You will also need to keep records of anything you received in exchange for the property, and details of who was involved in the exchange. It is very important to keep all information regarding any amounts that would form part of the cost base of the asset, and it is vital to have documented evidence of all tax deductions you’ve made for any expenditure related to the property,” Matthew emphasises.
RELATED ARTICLE: Investment Property Acquisition CGT Tax Expert Matthew Mousa of TLK Partners Kingsgrove Sydney
The importance of keeping records
“Record keeping is time consuming. Frankly it’s a real hassle. However, it is very important when you are dealing with you know who. If there is ever a dispute with the tax authorities, you must have documentary proof to back up your claim,” Matthew concludes.
RELATED ARTICLE: Private Investors Property Income Has Tax Implications Says TLK Partners Expert Matthew Mousa
TLK Partners Wealth Management Companies Kingsgrove, Beverly Hills | Tax Accountant & Agent | Property Adviser are wealth advisers serving enterprises and private individuals who hope to take care of their future through sound financial management. Visit their website or contact them at (02) 8090 4324 for an appointment to discuss your financial management and investment needs.
This material is of a general nature only, it does not take into consideration your financial circumstances, needs or objectives. Before making any decision based on this content, you should assess your own circumstances, seek professional advice or contact our office to be directed to the appropriate professional. Whilst all care has been taken in presenting the material neither TLK Partners or its associated entities guarantee that the material is free of error and, the information may have changed since being published.
Syndicated by Baxton Media, the Market Influencers.