What records do you need to keep for your rental* property? Here is a general guide. Note that this list assumes you are using a property manager. All costs are for the 12 months preceding 31 March:
In our view, Home Office expenses can be claimed if you have rental property; however, as it is generally passive income (unless you are managing the properties yourself) we recommend a conservative claim, as follows:
For the rental property:
If you'd like a downloadable copy, please see below.
Why keep good records? The better your records, the more expenses can be legitimately claimed, and the better the tax result is for you.
* For guidelines on Business Expenses (non-rental property) please see this page.
Other FAQs you might have:
USING ACCOUNTANCYONLINE.CO.NZ/MY TAX QUESTIONNAIRE
HOW DO I DOWNLOAD TRANSACTIONS FROM MY BANK'S ONLINE INTERNET BANKING?
WHAT IS XERO.COM?
WHAT'S THE PROCESS FOR MY TAX RETURNS?
The IRD provides a guide here under the heading "Deductions You Can and Can't Claim."
You have a rental property. Can you claim your holiday as an expense? If you spend time travelling as part of your business you can claim business travel as an expense. A good way to prove the business portion of your travel expenses is by keeping a diary of your travels.
In addition to keeping invoices, receipts and tickets you should also keep details of:
So how does the rental pay for my holiday?
Well, the first thing is to remember that there is no such thing as a free lunch - or a free trip - unless you win a competition or have a wealthy benefactor! However, there are such things as a tax-deductible trip, if not 100%, at least in part.
If you'd like to claim your holiday as a tax-deductible expense, then you need to
Then, your LTC/trust/partnership etc can claim tax deductions for some or all of the trip and other necessary expenses: hotels, car, meals, travel etc. Note however that there are some gotchas:
That leather jacket is not tax-deductible
Let's say you are in Queenstown, and you see a nice leather jacket. So, you buy it. The trip is 100% tax-deductible, because it meets all the criteria above. Can you claim the leather jacket? No. The guideline is "what is the nexus between this expense and the business activity?" If there is no clear link or nexus, then the item is not tax-deductible. In this case, what does a leather jacket have to do with your rental property? Nothing. So it is clearly not tax-deductible.
Don't go overboard with your expenses.
Always remember that tax concessions allowed are based on what the hypothetical "reasonable" person would do. A reasonable person would not eat out at the swankiest restaurant every night they were away. They might do that once, but not every night. So, don't get carried away.
Non-business parts of the trip are not deductible
Let's say that you arrive in another part of the country to inspect your rental property, meet with suppliers and possibly purchase another rental. You have a few days' worth of appointments set up, but you have planned to also take a few days to rest up as well. The total trip is 10 days, with 3 days' business pre-planned, and the rest being vacation. Therefore, you cannot claim the entire trip as a business expense. Instead, work out the proportion related to business (30%, in this example), and claim that percentage of the costs.
Can we claim for both of us then and the kids too?
Highly unlikely. Your children are likely not active working partners of your LTC etc, so you would have to make further adjustments to exclude costs related to their stay. What about your spouse or partner? Well, is your significant other a part of the business, e.g. a director of the company? A trustee of the trust (that owns the rental)? Are they actively involved in the taxable activities of the LTC? Is the firm/professional you are meeting at your destination expecting to meet both of you? Then likely yes you can claim.
Questions? Please feel free to contact us. And for clients, before you go away, please please please contact us.
Accounting for your rental residential investment property; specialised property tax advice. Buy me a coffee!