It's almost EOFY tax time, are you prepared? It is very easy to put off preparations until after 30 June, but doing this may mean you miss out on the best possible tax outcome from your property investment. The EOFY offers the best opportunity to sort out any issues you have with your investment properties. Whether these be bills due in July, or bad investments, loans with too high of an interest rate, or much more. The trick, however, is that there are some expenses that you should hold off from jumping into until after 30 June. So, to prepare you for EOFY tax time here are 7 tips for property investors.
1. Get your paperwork sorted
This is something that should be done well before 30 June. Getting your paperwork sorted and ready will allow the entire process to go smoothly. This is important even if you have an accountant (which you should! More in tip 7). You should bring together all of your bank statements for property related accounts, invoices and receipts, insurance documents, annual statement from your property manager, rates notices, and tax depreciation schedule. Bring all of this together before 30 June and you will have a much easier time getting ready for EOFY tax time. Doing so will give you more time to make sure you don’t miss any deductions.
2. Know what you can claim
Those with accountants may feel that this tip is unnecessary as their accountant should know this, after all, isn’t that part of the reason of having an accountant? While yes that is true to an extent, knowing what is possible to claim could help you make better investment decisions in the future.
Things you might be able to claim:
· Accountants fees, bookkeeping fees and fees for accounting software.
· Advertising for the property for rent.
· Your agents’ fees and commissions for property management.
· Bank charges for your accounts used for collecting rent and paying outgoings.
· Body corporate fees except for special purpose levy contributions for improvements, initial repairs.
· Borrowing expenses such as: search fees, valuation fees, survey and registration fees, stamp duty, broker’s commissions, mortgage insurance, etc. Borrowing expenses are deductible but not all at once make sure to check with your accountant.
· Cleaning whether it be internal and external (windows, pools, and more), gardening, lawn maintenance, or pest control.
· In-house audio and video service charge, like Foxtel, that has not been paid for by the tenant.
· Insurance premiums like building, contents, public liability.
· Interest expense on the loan.
· Lease preparation, registration, stamping.
· Legal costs for recovering unpaid rent, seeking damages for breach of agency agreement, reviewing tenant credit worthiness.
· Mortgage discharge expenses and penalty interest on early loan repayment.
· Postage, stationery, telephone calls and rental when it is related to dealing with real estate agents, tenants, services and other matters related to the rental property.
· Pre-payment of expenses where the full amount is less than $1,000 OR relates to a period of 12 months or less ending in the following financial year. Confirm this with your accountant.
· Quantity Surveyor (Tax depreciation) report for claiming capital allowance and depreciation.
· Rates (council and water) that are not paid for by the tenant.
· Repairs and maintenance during the tenancy. Initial repairs will be considered capital improvements and written down over time.
· Security monitoring costs.
There are potentially even more tax deductions that you could claim! Which is why it is important to have a good accountant by your side.
3. Consider paying any property related expenses early
You can claim a tax deduction for rates, insurance, and interest repayments on loans even if they are due after 30 June, as long as you pay them before 30 June. If you do have any unsettled bills or repayments for your investment properties that are due in July, consider pre-paying them in order to receive the tax benefit this financial year.
4. Fix any small repairs
Check out each of your rental properties before 30 June and see if there are any small repairs that need to be completed. These could be holes in the walls or broken taps. Get these repaired before 30 June so that you can claim the expense this financial year. Note that, fixing or repairing something back to its original function is classified as a repair (which is immediately tax deductible), where substantially improving or completely changing something may be deemed to be a capital improvement and therefore needs to be depreciated over several years. So keep this in mind – a repaid = full deduction and tax benefit this year.
5. Buying appliances and doing substantial renovations
When it comes to appliances or substantial renovations in your rental property you will need to depreciate this expense over several years. This means that if you incur the cost now, you need to spread out the claim of that cost over several years. This is called depreciation and it is place so spread the cost over the useful live of the appliance or renovation. Its important that you keep records of this expenditure and tell your accountant about it so they can claim it appropriately.
6. Review your investment loans
While you may receive a tax deduction on the loan for your investment property it is still a good time to ensure that you are getting the best interest rate possible on your loan so you pay less in the first place. You should speak to your mortgage broker annually to ensure that you have the best possible loan for your situation.
7. Partner with a good Accountant
The best way to ensure that you are not missing out on any tax deductions and getting the best result for your property is to partner with a good accountant. Not only can they help you get the best tax result, but they can offer some professional advice. A good accountant will be able to help advise you around your investment property decisions.
If you need advice from a good accountant come EOFY tax time talk to Link Advisors today!