When tax time comes around, it’s great to know the tips and tricks around managing your investment property’s tax claims.
With the next financial year right around the corner, there’s no better time to focus on getting your investment property’s tax records organised for EOFY.
Here’s a few tips from the team at ABA Tax:
Do you manage your property from home?
Don’t forget to keep a diary note of hours spent in your home office managing your investments to claim home office running expenses. You can also claim a portion of your home office internet, phone expenses and even depreciation on a computer or laptop apportioned to your use.
Deduct your property manager!
If you use a property manager, ensure you receive an annual statement and copies of all invoices relating to assets purchased over $300 so nothing is missed at tax time. Your accountant will thank you 🙂
Consider Pre-Paying your Expenses
If you are expecting that you will have a lower income next year (due to factors such as maternity leave, change in business income or redundancy) then why not prepay interest for up to 12 months in advance and reduce your higher income in the current financial year. Brilliant!
You can also get a deduction by pre-paying next year’s insurance premiums or bringing forward expenditure that would otherwise be spend after 30 June. Even better!
Don’t Miss Out on Borrowing Expenses
Borrowing expenses are deductible over 5 years and are one of the most commonly missed tax deductions for property investors.
Borrowing expenses include; title search fees charged by your lender, loan establishment fees, stamp duty charged on the mortgage LMI, mortgage broker fees & valuations for loan approval. Borrowing cost deductions can be quite significant and definitely not something you want to overlook. If you’re not sure that your claiming borrowing expenses correctly ask your Accountant to review properties purchased in the last 5 years.
Manage your capital gains!
Selling a property that was a residence usually allows you to be exempt from paying capital gains tax (CGT), but if you use that property to live in AND rent out…the CGT starts to appear.
Basically, if you rent out a space in a property that you reside in, you forfeit your right to the full CGT exemption. So, when you sell, you’ll have to pay a portion of the CGT, dependant on how much of the property was rented and for how long.
Keeping records of dates and market values will be extremely helpful in managing your capital gains come tax time!
BONUS TIP: Be gear informed! [We discuss this in another blog]
Whether your property is negatively or positively geared, you must understand how you can claim your net rental loss against your taxable income.
Depending on which income tax bracket you are in, having a negatively geared investment property can earn your back a significant tax return.
Depreciation plays a big part in maximising gearing so ensure you have a schedule.
For the most up-to-date taxation data and information go to www.ato.gov.au or contact ABA Tax on 1300 797 175.