If you funded the purchase of your rental property with an investment loan under split loan facility, as a result of the recent High Court decision in Hart's case, you will need to ensure that you only claim a deduction for part of the interest on the investment loan. You cannot claim a deduction for the extra interest imposed on the investment loan because you only made repayments on the home loan part of the split loan facility.

Common mistakes include:

• Claiming the cost of carrying out initial repairs - such as rectifying damage, defects or deterioration that existed at the time of purchasing the property - as immediate deductions. These costs are capital expenditure and may be claimed as capital works deductions over either 25 or 40 years, depending on when they were carried out.
• Claiming construction costs, which are eligible for capital works deductions, as decline in value deductions (previously known as depreciation)
• Claiming renovation costs as deductions for repairs - again, these are expenses of a capital nature and may be claimed as capital works deductions. The Tax Office is investigating claims for repairs which are really capital improvements, such as remodelling bathrooms and kitchens and adding a deck or pergola.
• Including the cost of the land in capital works deductions (ie as part of the cost of constructing the rental property).
• Overstating interest deductions by including amounts related to private borrowings ? interest on a loan taken out for both income-producing and private purposes, such as the purchase of a rental property and a private motor vehicle, needs to be apportioned into deductible and non-deductible parts, according to the amounts borrowed for the rental property and for the private purpose.
• Not apportioning travel costs where a visit to inspect the rental property is combined with another purpose, such as a holiday.
• Claiming deductions for a property that is not genuinely available for rental or not apportioning deductions where the property is rented for only part of the year.

Disclaimer: This information is a guide only. Consult your financial advisor or qualified Tax agent before acting on it