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Rental Property and CGT: What Records you Must Keep
“No job is finished until the paperwork is done” goes the old saying. And when it comes to your tax returns, never a truer word was said. 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 you in trouble when tax time comes. Baxton Property Management 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 your 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, you can use your bank statement, or similar documentation, to show the date of the payment.
Rental Income: To back-up your statement of rental income made from your investment property, you need to keep all the leases you have signed with your tenants, and the records of every bit of rent paid.
Other documents: These include loan agreements, land tax assessments, and bank statements. And if you use a property manager, you should keep all the records emanating from those managers.
How long do I have to keep the records?
You don’t have to send the records in with your tax return, but you will need to keep the paperwork for 5 years, in case there is a dispute arising out of any of your tax returns. If a dispute with the tax man does occur, you need to hold onto all documentation until your spat has been resolved, even if the five year period has expired before you sort it out.
Record keeping for capital gains tax
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. 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 you sell your property, that might not be among those you have kept for yearly tax purposes. These include the date on which you acquired the property, and the date you disposed of it.
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.
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.
Of course, if you use professional property managers, this becomes somewhat easier. However, the emphasis is still on you to keep your records secure for the required length of time. Baxton Property Management specialises in the management and maintenance of rental property, and this includes much of the relevant paperwork involved with its clients’ properties. For more info about their property management services, visit the Baxton website.
Written and syndicated by
– Baxton Media.
- Rental Property Construction: What Costs Are Tax Deductible?
- Tax impact of Selling or Buying Second-hand Depreciating Assets
- Rental Income Tax: Understanding low-cost vs low-value assets
We hope you enjoyed this article
The information contained in this article is based on the authors opinion only and is of a general nature which is not indicative of future results or events and does not consider your personal situation or particular needs. Professional advice should always be sought relevant to your circumstances.
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