5 Things Property Investors Can Do to Get More During this Year’s Tax Time
Did you know that there can be five easy things property investors can do that can add thousands to their tax return this coming tax time?
Keep reading to know more.
These very simple jobs can be done in the next few weeks for an almost immediate return.
Most property investors believe that when the month of June comes, it is already too late to take actions that will increase their tax position, BUT THEY ARE DEAD WRONG.
If you do these actions NOW – you will see thousands of extra dollars coming back to you from the ATO in just weeks!
Since national property values have escalated intensely in the past months, there has also been some valuable “little support from authorities for Australian investors over the past year”.
The Federal Budget provided not much relief for investors, so investors must act themselves to improve their benefits before June 30.
1. Easy Repairs and Maintenance
This is the perfect time to talk about ALL the minor maintenance for your investment property that has built up during the year.
There are usually a couple of small repairs needed on an investment. However, just because these items do not materially affect the property’s appeal or rentability, owners are prone to put off attending to them.
“For example, it could be just minor fixes, paint touch-ups or some garden maintenance.”
NOW IS THE TIME TO TAKE ACTION because any costs you incur in JUNE are 100% tax-deductible in JULY. “Miss this window of opportunity and you'll be waiting another year to get the benefit.”
2. Pay Your Loan Interest in Advance
If you happen to have extra funds that may allow you to pay your investment loan interest in advance, then this can be an extremely cost-effective way to get an exceptional tax return.
“Depending on your loan arrangements, paying a huge lump of interest in June can provide a substantial write-off come July.”
This is a strategy not many investors realise is open to them each financial year.
Another pro-tip: If you've redrawn equity from your investment property's loan, you must make sure that the funds have been used solely for investment purposes, otherwise the ATO will take you to task.
3. Upgrade Your Property
Implementing significant upgrades to your investment deliver outstanding tax advantages, and some can be done as soon as possible to allow you a benefit this year.
Constructing any additions to your investment will generate some great tax deductions, but not all are created equal.
“For example, adding new tiles will only get you 2.5% of the cost as a deduction each financial year, so doing that in June means you only get one month's worth of that amount.”
There are so many smarter ways for investors to promote upgrade deductions during tax time.
“Install items worth $300 or less. This could include kitchen appliances, window blinds and curtains, air conditioners and other generally non-structural assets. As an example, installing a $280 ceiling fan means the amount is deducted straight away.”
“Also choosing the right fixture will bring immediate relief. For example, if you install tiles worth $2500, you'll get $62.50 times the percentage of days left in that financial year as a deduction. But change the tiles to carpet and it's 10 times that amount as a 25% deduction.”
“Finally - consider installing equipment priced under $1000 as some deduction rules make this type of outlay late in the financial year extremely lucrative in terms of tax.”
4. Call Your Property Manager and Accountant
Not many people see the month of June as an opportunity to consult the help of their professional advisors.
Property managers hold a running record of tax-deductible repairs and upgrades as part of their annual rental statement that your accountant is required to read.
Additionally, your property manager should offer advice on works they can organise in the coming weeks that will help expand your deductions by the end of the financial year.
Another great thing about both accountants and property managers is that their service fees are also tax-deductible.
DO NOT FORGET TO INCLUDE THEIR PROFESSIONAL FEES IN YOUR TAX RETURN THIS YEAR.
5. Get a Depreciation Schedule
Depreciation schedules prepared by qualified professionals give massively advantageous tax-deductible depreciation to your property's fixtures, fittings, and finishes.
If you haven't already organised for a depreciation schedule, then get onto it today.
There is a great number of investors who miss out on literally thousands of dollars in benefit just because they do not get a depreciation schedule.
As these reports cost a few hundred dollars, the return is above exceptional.
“A recent MCG study revealed the average loss in deductions due to investors simply taking too long to arrange for a depreciation schedule was a staggering $20,000.”
“One investor waited almost 18 years to do a schedule and lost $41,000 in tax breaks as a result.”
“If you extrapolate our findings across the nation's total investor population, Aussie landlords are potentially short $2.886 billion on their claimable losses.”
References:
Mike Mortlock, “Five things property investors can do to get more back at tax time”, https://www.moneymag.com.au/property-investors-bigger-tax-refund