If you are one of the 2 million people in Australia* that have investment property, whether negatively or positively geared, tax time means getting your things in order to maximise your deductions, including your loan interest expenses.
Here’s 5 Top Tips this tax time:
1) Understand all of the deductions categories.
Expenses include; mortgage interest, bank charges, council rates, water rates, cleaning, pest control, gardening, repair and maintenance cost, insurance, body corporate fees, advertising for tenants and agent management fees, capital works, depreciation, insurance, land tax and travel to inspect or maintain the property. Whilst you may have a good accountant, it is important for you to have an understanding of what can be claimed in order to provide them with the best possible information for deductions.
2) Don’t forget depreciation and capital works.
You can claim depreciation for the decline in value of the assets in your investment property such as hot water systems, carpets and heating and cooling systems. You may also be able to claim capital works expenses from the construction of the property, usually over 25 to 40 years. These deductions can be significant, particularly in new properties. The easiest way to understand and calculate depreciation and capital works, is to invest in a tax depreciation report from specialists such as BMT.
3) Ensure you keep records.
If you rent your investment property through an agent, they may handle the vast majority of your property expenses and provide you with an annual statement with these classified according to the taxation requirements. It is likely though you also incur expenses; such as interest on your investment property loan, bank charges, insurance, travel expenses and possibly land tax. The ATO is known to audit investment property owners and adequate receipts and records including those provided by your agent need to be kept for a minimum of 7 years.
4) Don’t forget the impact of capital gains when it comes time to sell.
There can be substantial tax advantages of investing in property, however keep in mind when it comes time to sell there may be tax payable on any capital gains. For property owned over 12 months, the 50% discount applies. It may also be possible to time capital gains with other capital losses. It’s best to speak to your accountant before making plans to sell your investment property to plan for the capital gains impact.
5) Have a great accountant!
Last but not least, make sure you have a good accountant that is across all aspects of investment property to keep you on the right track and maximise your investment deductions.
Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing advice you can trust. Whether it’s buying a home, refinancing a loan, investing, building or renovating, Doug brings a wealth of knowledge and expertise to assist with your lending needs.
You can contact Doug at (e) firstname.lastname@example.org or (m) 0408 671 524.
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This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.