The importance of accurate record keeping cannot be overestimated when dealing with investment property. Due to the complexity of taxation laws in relation to property investment it is advisable to update records regularly. A successful investor is an informed one and ongoing education is invaluable.
Property investors should create a habit of analysing their investment at least quarterly. That would include reviewing their records of income, expense and repairs or improvements.
The ATO have the power to ask questions in relation to your investment property and your income. It is wise to ensure that all documentation is accurate and available – after all, who really wants an audit?
First time property investors need to know the types of documentation that need to be maintained. The very first thing that an investor should acquire is a depreciation schedule from a quantity surveyor. This is a document that justifies claims in relation to depreciation and improvements to the property.
Records that savvy property investors maintain include:
1. Depreciation schedule
2. Loan documents and statements detailing interest payments
3. Records of solicitor and accountant fees and statements
4. Monthly rental statements from agent
5. Copies of receipts for expenses such as rates, cleaning, agent’s fees
6. Bank statements
7. Records in relation to any costs of improvements
8. Records in relation to any expenses
How Should I Keep Track of My Records?
You should keep a digital copy (computer) and a hard copy (paper) of all of your records.
You will want to use a spreadsheet to keep track of your income and expenses. You should do this as soon as the income comes in or the expense occurs. You will want to include as much detailed information as possible: the date, time, who it was paid to or who paid you, nature of the income or expense, and the amount.
Separate records for each property, for each type of expense, and for separate types of income. The point is to record as much information as you can at the time of the transaction, so that you can easily create financial reports in the future.
You should always back them up on cd, on an external hard drive and even with a paper copy. They should be printed out at the end of every month and/or the end of the year.