With the end of financial year fast approaching we turned to the Australian Taxation Office to learn about the traits of tax-smart property investors. Do you do all seven?

1. Declare all income

Any income you receive when you rent out your property must be declared on your tax return.

2. Keep proof of all expenses

Any time you spend money on your investment property, you should keep proof of expenditure, such as a receipt.

3. Track when you use your rental for private use

If you, your family or friends stay in your rental property for free or a reduced rate, this will affect the expenses you can claim for that period.

4. Only claim interest expenses on the part of your loan that relates to your rental property

You can claim interest charged on a loan relating to your rental property. However if you use part of that loan for private purposes, such as to buy a new family car, you can’t claim interest on that part of the loan.

5. Claim improvements or initial repairs as capital works

Improvements such as renovating the bathroom or initial repairs for damage that existed when you purchased the property must be claimed as capital works expenses and spread over a number of years, not claimed as an outright deduction.

6. Correctly divide income and expenses of co-owned properties

If you share ownership of your rental property with another, you’ll need to divide the income and expenses according to your legal interest in the property.

7. Increase your knowledge

The ATO website contains a wide range of useful information, including an in depth guide to rental properties along with real-life case studies.