For those property investors who haven't yet given their tax return much thought, now is the perfect time to get a better understanding of how you can best prepare to lodge your return this year.
Of course, every dollar you can claim on your investment property will benefit your overall financial wellbeing, so it is important to take proactive steps now to ensure you'll be in the best position possible when lodging your return.
While as a property investor you are privy to a range of specialised tax breaks, there are also a lot of things that you may not have realised you could claim.
For instance, you may be able to claim a range of expenses, including
- agents' fees
- body corporate fees
- capital expenses
- building maintenance and repairs
- home loan fees and interest payments
- Don't forget council and water rates, plus the cost of travel to and from the property for inspections can also be claimed.
Another aspect that often gets overlooked when lodging a tax return is depreciation deductions. Depreciation applies to new and existing residential properties and in most cases owners of an investment property or properties are likely to be able to claim something. It relates to the decline in value of items inside a property and sometimes applies to the structure of the property itself.
Claims can also be made for items that may fall in value over time, such as fixtures and fittings, floor coverings, appliances and built-in wardrobes.
If you own an investment property in a strata building, it is a good idea to keep in mind that you may be able to claim depreciation on a portion of the value of items and equipment in common areas, such as carpets and furniture in foyer areas.
A loan structure to maximise your tax deductions
One of the most common mistakes investors make is bundling all their properties under the one loan and not clearly defining what percentage of their loan funds each property.
In other words, if your owner-occupied property is funded via the same mortgage as your rental property, it is important for you to clearly state exactly what portion of your loan is related to your existing owner occupied property and what portion is related to your investment property.
Having a clear separation will help you at tax time as you will be able to work out what proportion of the interest can be claimed as an expense against your rental income.
With so much to consider, preparing your tax return as a property investor can seem a touch overwhelming. It is for this reason that it is so important to deal with a professional.
An accountant will be able to help you identify exactly what you can and cannot claim and what can be written off down the track.
In addition to seeing an accountant, it is important to consult your mortgage broker and make sure your investment loan is structured in such a way that you can maximise your tax deductions.
For more information on how you can best prepare to lodge your tax return as a property investor, contact your local Mortgage Choice broker.