To say that Australians love property would be an understatement. We have one of the highest home ownership rates in the world and we have one of the highest investment rates in the world.
In 2008 more than 1.4 million people claimed rental deductions against their tax returns and 200,000 first time property investors are expected to raise that number to 1.6 million this year.
Even with negative gearing, claiming losses and cutting your costs all being allowed under our tax system, there are still a large number of mistakes being made every year when it comes to property tax returns.
The Australian Taxation Office has stated that more than 25 billion was claimed in deductions on rental properties last year, making real estate one of the largest sources of claims.
Frank Brass director of tax company H & R Block has stated that one of the biggest expenses and the area where often the most mistakes are made is claiming interest paid on borrowings.
If some of the money is use for private expenses the interest amount has to be worked out pro rata. This is very expensive to get your tax agent to do. The intention is to have a separate loan account against which interest can be charged and claimed as a tax deduction.
Values should not frighten potential investors as if they are liable for a million dollar tax bill then they would have had to have earned two million.