The end of financial year is a busy time for property investors, who must review their investments, check their records and put together receipts ready to lodge their return. As we mentioned in our EOFY article last year, tax time can be difficult and costly for investors if they are not clever about how they manage their return, especially those new to property investing.
The best general advice we can give is to ensure you are prepared and keep good records. Investing in property can mean a lot of paperwork, from loan statements to insurance, rates, lease agreements and much more. In order to claim deductions for expenses and add capital outgoings to your cost base for your property, you must have proper records.
Aside from good record keeping, here are our EOFY tips for 2018.
Maximising Your Tax Refund
There are a few simple things property investors can do to maximise their refunds before the 2018 end of financial year:
● Know what is tax deductible for your investment property (more on that later).
● If you’re thinking about buying a new house, keep in mind that the $20,000 immediate asset write off for small business entities runs until 30 June 2018.
● Pre-pay your interest on your property investment loans or make additional super contributions if you have a spike in taxable income this year due to capital gains, redundancy or distribution.
● Pay rates/insurance due in July when they are issued in June.
● Bring forward any property expenses into the current financial year, e.g. any repairs that need to be completed over the next six months.
Keep in mind that these tips are of a general nature and it’s advisable to seek specific advice from a qualified expert before taking any action that might impact your tax position, especially when it comes to making additional super contributions.
What Expenses are Tax Deductible?
Possible expenses you may be able to claim include:
● Advertising for tenants
● Agent management fees
● Bank charges
● Body corporate fees
● Borrowing expenses
● Capital works
● Cleaning
● Council rates
● Depreciation on plant and equipment
● Gardening and lawn mowing
● Insurance
● Interest expenses
● Land tax
● Legal expenses
● Pest control
● Phone
● Repairs and maintenance
● Stationery and postage
● Water charges
What Expenses are NOT Tax Deductible?
The following expenses cannot be claimed:
● Borrowing costs and interest expenses related to loans against an investment property that have been used for private purposes
● Costs relating to the purchase or sale of property
● Costs relating to your personal use of the property
● Costs to strata-title a property
● Improvements to the property that are not repairs, e.g. changes to design or functionality
● Travel undertaken to inspect or maintain the property or to collect the rent (not deductible as of 1 July 2017)
● Utilities paid by the tenant
Strengthen Your Financial Position
With the right strategy for managing your tax obligations, you can find yourself in a stronger financial position than expected. At that point, you may just consider expanding your property investment portfolio further.
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