With the EOFY year approaching, now is the perfect time to start getting your taxes in order in a bid to maximise your after-tax income. Here are some useful tips for real estate professionals.
As the EOFY closes in, the clear advice for real estate professionals from the ATO is to know your deductions and keep good records.
Tax time, while often daunting, can be a real opportunity to maximise your earnings. With some clever deductions and a bit of preparation, both individuals and businesses can boost their bottom line, if done correctly.
Generally speaking, real estate agents are one of the largest claimers of deductions. On average agents claim over $8,000 per year in deductions, which is nearly three times as much as the average worker.
The ATO has three golden rules that you need to remember when claiming deductions for your business. According to ATO Assistant Commissioner Karen Foat, it’s important to ensure everything you are claiming as a deduction is warranted.
“To claim a deduction for a work-related expense you must have spent the money yourself and weren’t reimbursed, it must be directly related to earning your income, and you must have a record to prove it,” she said.
“The other big concern is taxpayers buying things for personal use because they believe they can be claimed as a work-related expense. If the expense is for both work and private purposes, you can only claim a deduction for the work-related portion. Also, make sure you don’t rely on what other people claim as a guide to what you can claim.”
For most real estate agents, understanding what exactly can be deducted is the main issue given the nature of the job. According to the ATO, there are a few key categories that are of most interest to agents.
Car and Transport Expenses
You are able to deduct the costs of both public and private transport for travelling while on the job and this is likely one of the biggest costs agents will incur. You are even able to claim for trips when you are driving between two separate jobs, such as a part-time job. However, it is important to note that as a general rule, you can’t claim expenses for trips to and from work.
If you think you will travel by car and that will be less than 5000 kilometres over the course of the tax year, you can use a cents per litre claim. If it is likely going to be more than that you can use one of the other methods and claim either one-third of the actual costs by keeping a logbook or claim 12 per cent of the original value of the car.
Clothing can often be a bit of a grey area for real estate professionals. To claim clothing related expenses, they must be a part of a work uniform or some type of corporate wardrobe that has a business logo. Generally, that will be something like a shirt, blazer or even a tie. That also means you can’t claim the costs of plain clothing that you only wear to work. You also can’t claim cosmetics, haircuts, and grooming products.
You are able to claim for travel expenses if you need to travel overnight from your usual work location. Travel costs include meals and accommodation, fares, petrol and incidentals such as parking fees and tolls. The most important thing here is that the travel was overnight and day trips don’t count.
If you work out of a home office you will be able to claim for that, but only a percentage. This area might include depreciation of office equipment, work-related phone calls and internet access charges, and electricity for heating, cooling and lighting costs. You generally can’t claim the cost of rates, mortgage interest, rent and insurance.
You can claim a deduction for the cost of gifts on many smaller items such as alcohol or flowers that are bought for work purposes. The important thing to note here is that you need to be on some type of commission-based role such as sales. You can’t claim a deduction if you earn a fixed income and don’t earn a commission.
Unfortunately, you can’t claim a deduction for gifts that are in the form of entertainment such as a live sport or music event.
Some of the other main deductions for agents could be for real estate licences and renewals, stationary/business cards, advertising costs, mobile/telephone and referral expenses.
Like most things, the key to tax time is being prepared and keeping good records. Remember if you have no evidence of the expense then you won’t be able to claim for it.