June 07, 2016
Whether you love or hate doing your tax, it’s important to be prepared. Getting a head start on your tax preparations will give you enough time to properly assess your financial situation and make smarter decisions regarding those last-minute deductions.
Tax preparation is particularly important for anyone with an investment property, as you are entitled to a number of deductions. Understand what you can and can’t claim and not only will your accountant love you, but you’ll also put yourself in a position to generate a greater return.
Here’s what you can do to get ready for tax time.
Know what deductions you can claim
If you own a rental property, there are a lot of expenses you can claim as tax deductions. These include:
- Property management fees
- Advertising costs for finding new tenants
- Phone, travel and accounting expenses related to the property
- General maintenance such as pest control and gardening
- Strata fees
- Interest payments and ongoing loan fees
- Land tax
- Capital works
- Council and water rates
- Depreciation of assets such as appliances, carpets and the building itself
Expenses you can’t claim:
- Costs associated with selling a property, such as legal fees
- Costs associated with purchasing a property
- Water, electricity and other utilities paid for by the tenant
- Borrowing costs for equity on your property (when you use the funds for personal assets)
Maximising your tax return
A lot of landlords aren’t aware that they can claim things such as phone calls, stationery and travel for their rental property. These smaller costs do add up and are worth keeping a record of. For other expenses such as repairs and maintenance, ensure you contact your property manager to get records of any receipts they may have.
If you don’t already have a depreciation schedule for your property, you will need to arrange one of these before you see your accountant. Without one of these, you won’t be able to claim depreciation on the building and fixtures such as appliances, carpet and blinds.
Other ways you can offset your taxable income include:
- Take out private health cover
- Personal and spousal super contributions
- Prepay interest on your investment property loan
- Negative gearing
- Capital losses
- Claim any work-related expenses
For investment property owners, it is wise to consult an accountant regularly rather than just at tax time. A good accountant does more than push papers for the tax office – they engage in tax planning, which will help you to make informed financial decisions throughout the year.
By going through your financial records ahead of June 30, you will have a clear picture of where you are sitting financially. That means you will have enough time to allocate funds for any last-minute spending you may wish to do.
Restructuring your investment loan at tax time
As a landlord, you don’t always have time to review every expense related to your investment property. At this time of year, it is a good idea to take a closer look at your spending and identify areas where you could be making savings. If your loan has high fees or high interest rates, you may be able to make substantial savings by refinancing.
We see a lot of landlords at this time of year and we encourage you to investigate your options, particularly given all of the recent changes to investment lending.