Tax Audit Insurance

Landlords should be a little nervous opening their mail in the next few months -
particularly if it has the tax office emblem on the envelope - because a major
crackdown on property related tax deductions is underway and for the first time the
tax office has new powerful data matching capabilities to identify problem areas.
The tax office has announced that one of its key audit activities in the year ahead will
be tax deductions relating to rental income and property investment. No surprise
there because of a dramatic surge in negative gearing tax deductions. The ATO says
rental deductions in 2003-4 financial year jumped 19.5 per cent to $17.8 billion.
You can understand why it has got the tax office's attention - property investors only
declared total rental income of $15.2 billion. The losses claimed by investors
effectively doubled in the last financial year.

Source: “Tax Office Finding Its Property Voice” Smart Investing, by Robin Bowerman 12 August 2005

This is where the most recent addition to the Terri Scheer Landlord Preferred Policy
can help. We’ve added a unique benefit to our policy, called Tax Audit Insurance and
what’s more, it’s at no additional cost to your Landlords.
Tax Audit Insurance provides cover for landlords in the event of an investigation or
audit of their financial or taxation affairs relating to the investment property covered by
the Landlord Preferred Policy. The audit must be initiated and undertaken by an
authorised Commonwealth, State or Territory government, government authority or
agency in relation to, and, following the lodgement of a tax return.
The cover provides for the cost of the professional fees (generally accountant's fees)
incurred by the Landlord in connection with responding to or defending the audit.
Tax Audit Insurance does not provide cover for the Landlord to have their tax return
prepared and lodged by their accountant, it is only to respond to an audit undertaken
following lodgment of the tax return.
For further information regarding this exclusive benefit, please contact your local Terri
Scheer office.
For full details of the Tax Audit Insurance, please refer to the Terri Scheer Landlord
Preferred Policy Product Disclosure Statement and Policy wording dated March 2006.
(This information has been provided by Terri Scheer Insurance Brokers)

SMOKE ALARMS – Handy hints!

Depending on the floor layout of your home, more than one alarm may be required to adequately protect the bedroom areas. It is recommended that where more than one alarm is installed, they be interconnected, so that both alarms will activate upon the detection of smoke. Also… Alarms should be located where false alarms will not be caused by steam from bathrooms, normal cooking fumes etc

(Source: City of Holdfast Bay website)

Landlord Penalty Highlights Importance of Professional Property Managers

The conviction of a landlord for failure to comply with the Residential Tenancies Act recently highlights the importance of having investment properties professionally managed by a registered agency according to the Real Estate Institute of South Australia (REISA).
“Managing rental properties can be complex and time consuming and there are many regulations under the Residential Tenancies Act which must be strictly complied with,” REISA President, Mark Sanderson said.
“This includes lodging bonds correctly and within the regulated time frame and also representing landlords in the Residential Tenancies Tribunal should there be any breaches of contract.”
“By engaging a professional property manager, landlords can have peace of mind that all of these essentials are taken care of on their behalf.”
Mr Sanderson also urged tenants seeking rental property to deal with professional managers.
“There are many cases of private landlords not complying with the Act and this can include failing to lodge bonds. For a tenant, renting through a property manager will ensure that your financial interest in the property is properly secured.”
Mr Sanderson said that there was a common perception amongst first-time investors that renting a property is a simple and easy process.
“New landlords are often unaware of how much regular contact with the tenant is required and the State Government legislation that must be strictly adhered to.”
“Also, if there are any breaches of the agreement, there is a precise manner in which disputes must be handled.”
“Professional property managers are trained in these matters and coupled with their practical experience, they are the best people to be managing your valuable investment.

Residential Vacancy Rates

Adelaide has experienced a strong start to 2006 with
vacancy rates at an all time low. The traditional busy
months of Jan, Feb & March have this year been well
documented for the lack of Residential properties
available in all areas with vacancy rates at at approx 1%.
While a slight slowing has occurred since this time it
remains a fantastic time to consider investment properties
with the average vacancy rate currently 1.7% & remaining
very low compared to other capital cities.
Rental returns have increased in the 6 months to June
by an average of 3% which also reflects the strength of the
current market.
Recently released figures released by the REISA show
average vacancies for key areas for the month of May.
Metropolitan Residential Vacancy Rates
May, 2006
Source: The Real Estate Institute of SA Inc
RaTES
Properties Houses Units Vacant
Surveyed Vacant Rates
Adelaide has experienced a strong start to 2006 with
vacancy rates at an all time low. The traditional busy
months of Jan, Feb & March have this year been well
documented for the lack of Residential properties
available in all areas with vacancy rates at at approx 1%.
While a slight slowing has occurred since this time it
remains a fantastic time to consider investment properties
with the average vacancy rate currently 1.7% & remaining
very low compared to other capital cities.
Rental returns have increased in the 6 months to June
by an average of 3% which also reflects the strength of the
current market.
Recently released figures released by the REISA show
average vacancies for key areas for the month of May.

Properties Surveyed		Houses Vacant	Units	Vacant Rates
City/N Adel	483	1	4	1.04%
North	2217	36	12	2.17%
East	1057	7	3	0.95%
South	1216	12	5	1.40%
West	1002	10	13	2.30%
Hills	17	0	0	0.00%
Totals	5992	66	37	1.72%

Rent Increases

As tenants leave, you may charge increased rent to
the new tenants when negotiating a new tenancy
agreement. With a current periodic tenancy
agreement, you are required to give a tenant written
notice specifying the amount of the increase and the
day on which it is to commence.
This day must not be less than sixty days after you have
given the notice and not less than six months after the
tenant has moved in, or when the rent was last increased.
For a tenancy for a fixed term, you are not allowed to
increase the rent during the term unless the agreement
expressly provides that it can be increased. Then it can be
increased in accordance with the above.
(This information has been provided by the Office
of Consumer and Business Affairs SA)

Safety of Balconies

Outdoor living areas such as decks and balconies are becoming increasingly popular for gatherings.
There is a definite need to inspect decks and balconies for rotting timbers and corroded steel fittings.

In the last few years, balcony collapses in several states have resulted in injuries and even deaths.
Coastal properties are in the high-risk categories because of the harsh environment and salt damage to metal fittings.

As a safety measure, carefully check support beams and posts, also shaky handrails and balustrades, rusting bolts and brackets, rust stains and cracking in concrete balconies. Look for soft, spongy sect ions of compressed timber. If doubts linger, it's best to arrange a professional inspection.

Apart from injury or death, homeowners would be foolish to ignore the possibility of a legal liability or damage claim which may arise from a collapsing deck proven to be in poor condition. The deck has become a major part of the house. If damages are found, take immediate action to repair them. If you are unsure, seek professional advice.

(This information has been provided by Terri Scheer Insurance Brokers)

Rental Rewards

Toop and Toop Property Management have recently taken on board the services of Rental Rewards which allows tenants to make payments using their credit card. By using this system they are also able to accumulate points which are redeemable as an incentive for using the system. We are now extending this facility to Landlords who might need to contribute funds for additional expenses such as advertising or capital expenditure. For more information please visit their website:

www.rentalrewards.com.au

There is a 1.32% convenience fee applied when using this service.

VACANCY RATES

The traditional slower months of April & May are continuing to show a higher demand for rental properties in Adelaide as did the first quarter of the year.
Consistent strong demand is now forcing rental prices up quite sharply. It would be fair to say that rental properties at Toop&Toop have experienced average rent increase of approx 5% since the beginning of the year and providing improved return for investors.
Our current vacancy rate remains steady at 1%

Australian Tax Office Advice

The Tax Office has identified common mistakes made by people declaring rental income and claiming deductions. Last year more than 1.3 million taxpayers declared rental income in their tax returns with around 220,000 of these claiming deductions for the first time Advice for first-timers. There are some common mistakes made by both first-time and other rental property owners:

• You incorrectly claim the cost of the land as a capital works deduction, that is, as part of the cost of constructing or renovating the rental property.
  You incorrectly claim the cost of improvements such as remodelling bathrooms or kitchens or adding a deck or pergola as repairs. These are capital improvements and should be claimed as capital works deductions.
  
• You overstate claims for deductions on the interest on the loan taken out to purchase, renovate or maintain the property. A loan may be taken out for both income-producing and private purposes, such as to purchase motor vehicles or other goods or services. The interest on this private portion of the loan is not deductible and should not be claimed.
  
• You incorrectly claim the full cost of an inspection visit when it is combined with another private purpose, such as a holiday. In such cases, you can only claim that portion of the travel costs that relate directly to the property inspection.
  
• You claim deductions for properties which are not genuinely available for rent.
  
• You incorrectly claim deductions when properties are only available for rent for part of the year. If a holiday home or unit is used by you or your friends or your relatives free of charge for part of the year, you are not entitled to a deduction for costs incurred during those periods.
  
• You claim deductions for items incorrectly classified as depreciating assets. We have produced a comprehensive list of more than 230 residential property items identifying whether they are depreciating assets eligible for a decline in value deduction, or as assets eligible for a capital works deduction. This list is in the Rental properties booklet (see Help and advice below for details).
  
• If you financed the purchase of your rental property using a split loan facility, you cannot claim a deduction for the extra capitalised interest expense imposed under that facility.
  

Help and advice
Australian Taxation Office have produced a comprehensive booklet, Rental properties, to help you get it right. You can get a copy by phoning 1300 720 092 or by visiting their website at http://www.ato.gov.au/.

Adelaide vacancy rate at 23 month low

Adelaide's rental market vacancy rate has hit its lowest level in 23 months, the State's peak real estate body said today.

The Adelaide vacancy rate dropped to 1.4% in the month of February, according to the Real Estate Institute of South Australia's exclusive monthly survey.

“Vacancy rates are returning to the levels they achieved continuously in 2003 and early 2004 – in the middle of the property boom,” REISA President Mark Sanderson said.

“Anecdotal evidence from property managers indicates that properties are often only staying vacant for a few days before being snatched up.” Mr Sanderson said the low rate was triggered by a rental shortage in Adelaide.

“Investors have been selling up over the past year and this is now starting to hit the rental market hard,” he said. “However, this sends a strong message out that the Adelaide rental market is running hot and it will hopefully start to attract investors back to the stability of bricks and mortar investment.”

Mr Sanderson said that many renters are having to resort to the more expensive properties.

“In January all of the cheaper properties were snatched up and now people are going for whatever is left, which has caused the low rate of 1.4%.”

“The last time Adelaide's vacancy rate was this low was in March 2004 when it was 1.3%.”

The REISA vacancy rate survey is broken down into six main areas. The parameters and statistics during February 2006 were:

City - All city and North Adelaide only. – 0.2%

West – Suburbs west of West Terrace, between Port Road and Anzac Highway, including Glenelg suburbs. – 1.8%

South – Suburbs south of South Terrace, between Glen Osmond Road and Anzac Highway, excluding Glenelg suburbs. – 1.2%

East – Suburbs east of the city square, between Payneham and Glen Osmond Roads, excluding the Hills area. – 1.9%

North – Suburbs north of North Adelaide, between Port and Payneham Roads, turning into Lower North East Road. – 1.4%

Hills – Suburbs from Crafers to Nairne. – 0.6%

REISA conducts its exclusive residential vacancy rate survey monthly. About 5800 properties were included in the survey undertaken for February 2006 with statistics kindly provided by REISA member property managers across the metropolitan area.