Tax Tips for Property Investors

by | Sep 20, 2018

It’s Often Said Only Two Things In Life Are Certain – Death And Taxes.

If you want to squeeze every cent from your portfolio there are things you need to do and have in place before you go to your accountant.

Our advice every year is squeeze every cent from your investment property at tax time. Obviously no one wants to give more money to the tax man than they have to. So what is deductable and what’s not for property investors? Many people actually don’t really have a concise understanding (a vague understanding maybe)… but do you know absolutely everything your entitled to?

Positive Real Estate have specialist property investment expert accountants who know taxation law inside and out who clients can access as part of the Lifetime Mentoring Program.

Claiming all your entitled deductions is one of the crucial elements of maximising the returns of your property investments. By using the most up-to-date savvy taxation structures to your advantage, property investing can ensure your property investment portfolio remains consistently in the green, with cash flow to sustain your investments.

Failing to remain on top of your tax and applicable deductions could cause you immense financial pain! This is your business… your future and being completely on the ball and up to date with your taxes could mean the difference between your success or failure!

Tax Tip: If you lodge your tax return early in the new financial year, then the tax saving can take effect quickly. You will minimise the time between spending the money and getting a tax deduction. This will help your cash flow.

If you are using a professional accountant make sure they themselves are a property investor.

Tax Tip: Care should be taken in determining whether a maintenance or repair is deductible or it is considered a renovation or of a capital nature.

If the work is fixing up damage caused by wear and tear, the expense is likely to be a repair. But where new materials replace the old, the item is likely to be depreciated.

The difference is the amount that can be claimed as a deduction and therefore tax savings.

If during this new financial year you are likely to have a high taxable income then you may like to bring forward repairs and maintenance planned for the investment property into this financial year instead of leaving them to the following year. This will generate a deduction and save some tax.

Tax Tip: Depreciation is the wear and tear on building and equipment. Claiming a tax deduction for this expense does not require any cash payment. You get a tax saving without paying any additional money.

To maximise your deductions it is prudent to get a Quantity Surveyor to produce a report for you as they are skilled cost estimators. You get a nice report which minimises your accountants time and cost in preparing your tax return

Most agents now send out Annual Rent Statements summarising the rental revenue collected and expenses paid on behalf of the landlord. These save a lot of time. Make these available to your tax agent.

Take care when using these statements to prepare your 2010 tax returns. Real estate agents do not always pay for all rental expenses including land tax and insurances. Landlords usually do that.

Tax Tip: Use your accountant’s rental templates to summarise all expenses and present a complete picture of each property’s situation.

Where you have negatively geared rental investments, the negative part offsets against your other income e.g. salary, reducing your tax payable and resulting in a large refund when your tax return is lodged.

This refund can be used to reduce your loan, pay your interest expense or help finance another investment property.

To help with cash flow, would it not be great if you were able to access this refund throughout the year instead of waiting till the end of the year? This can help finance that extra property which has potential to pick up some capital growth between the beginning and end of the year.

This can be done by lodging an application to vary the ‘Income Tax Withholding’ using a form from ATO. This can be done electronically online or you can download the form, prepare and lodge it manually.

If you need help, contact your accountant.

Tax Tip: Depending on your personal circumstances the additional refund from negative gearing may not be substantial. If the savings are small you should consider saving the cost of preparation and claiming the deductions at year end when lodging the tax return.

To get the maximum benefits out of the cash flow savings now is the best time to prepare and lodge the Application for ITWV – because then you can get the full effect of lower tax deductions by the employer. ATO takes about 2-3 weeks to process the application.

Tax Tip: When lodging electronically ensure you keep a copy of the electronic receipt or make a record of the receipt reference number. It helps when chasing up ATO.

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