The end of financial year is literally only a couple of days away, and that means tax time is just around the corner.
For property investors, this time of the year can mark an opportunity to make significant tax savings, so here are some tips that investors may want to consider before the new financial year ticks over.
Deductions
Deductions for council rates, strata fees, advertising, water, cleaning, repairs, insurance, property management fees and gardening and lawn mowing can be claimed for rental related expenses while a property is leased or available for rent.
In addition, there are other expenses that can be claimed gradually over several years. These include loan establishment fees, lender’s mortgage insurance, title search fees, mortgage broker fees and stamp duty charged on the mortgage.
MARQ Portfolio Manager Alex Piatrova-Kuminskaya said getting your finances and outstanding accounts in order is a wise move before the end of financial year.
“I recommend paying any outstanding invoices by the end of financial year so that your accounts more accurately reflect the entire year,” Alex said.
“You may also want to consider bringing forward any purchases of big ticket items that need to be replaced because you may be able to claim it as a tax deduction now, rather than wait another full year to make the claim.”
Hold onto your receipts
Investing in property can attract significant tax benefits for landlords and investors, but the Australian Taxation Office requires owners to keep good records and receipts in order to make these deductions.
“Keeping track of all rental expenses including interest, maintenance, repairs and depreciation, as well as damage and repairs undertaken to the property, is really important if you plan to include these as deductions,” Alex said.
“Hold onto your receipts and have a good filing system so you can find them easily when you need them to prepare your tax return. Being organised is even more important if you have multiple investments.”
If the ATO audits your tax return and you are unable to provide evidence of your claims, you may be denied these deductions and possibly face financial penalties.
Claim depreciation
Depreciation can be claimed as a tax deduction for fixtures in rental properties such as carpets and installed appliances to reduce taxable income.
“It’s a good idea to ask a specialist to draw up a depreciation schedule for your property,” Alex said. “This is a customised document that sets out the depreciation that can be claimed over time.”
“Depreciation reports usually only cost a few hundred dollars, but that fee is fully tax deductible. The report will also help save time and money when it comes to tax time.”
While renovations and home improvements are not generally able to be claimed immediately, landlords can claim depreciation over a period of time.
Other expenses such as loan establishment fees, lender’s mortgage insurance, title search fees and mortgage broker charges can be claimed over several years.
Get good advice
Engaging a professional accountant will ensure you make the most of your annual tax return, as they should understand your financial position and be able to provide advice about your investments as well as any deductions you can claim.
More information is also available from the Australian Taxation Office website at www.ato.gov.au