The end of the financial year is an important time for property investors.
We look at 6 things you need to do before 30 June rolls around this year.
1. Speak to your accountant
Few advisors are as important to any property investor as a good accountant. Your accountant should understand your financial situation and be able to advise you on the best way to go about structuring your investment. They should also be your first port of call for finding out the tax implications of any income you receive from the property, as well as any associated expenses. If your investment is negatively geared, a good accountant should also help make sure your cash flow is maximised, so that you receive tax benefits through the year rather than in one hit.
2. Get your records together
Investment properties can come with great tax benefits, including the ability to claim interest, travel, repairs and depreciation. However, to claim these, you also need to keep good records. Now is the time to make sure those receipts and documents are in order. As part of this, you should also make sure you have a good depreciation schedule prepared by a quantity surveyor. This sets out every item in your home that’s eligible for depreciation and gets lodged with your annual tax return.
3. Consider making any repairs
One of the most important tax benefits for landlords is that repairs are completely tax-deductible when they happen. You don’t have to depreciate them over time. This means you can effectively reduce your income and pay less tax in the financial year in which you carry them out. However, in the eyes of the ATO there’s a difference between repairs and improvements. The second category – which includes extensions and renovations – needs to be claimed over time rather than in one hit. So be careful about which category your work falls into and speak to your tax advisor if you’re in any doubt.
4. Get your timing right
Whether you do something before or after 30 June can matter a lot when it comes to your tax. Not only are most expenses deductible during the financial year they’re incurred, any income you receive from renting or selling an investment property also gets counted in the financial year you receive it. That means if you sell a property before 30 June for a profit, any capital gains tax (CGT) you must pay will be based on this year’s income. After 30 June, it counts towards next year’s.
5. Consider next year’s interest bill
If you want to reduce your taxable income this financial year, one way you may be able to do it is to prepay next year’s interest on any loan you have over your investment property. However, to do this you’ll need to meet a few criteria. These include having a fixed rate home loan and having that loan entirely separate from your personal finances.
If you’re looking to reduce your tax bill, you may also be able to pre-pay some of next year’s expenses before 30 June. This may include rates and levies and some insurance premiums. Again, speak to your accountant if you’re interested in knowing how to do this.
6. Speak to us
We can help you make the most of the looming end of financial year. We can also advise you on what you should be doing on a practical level to improve your property’s value and potentially minimise tax. For instance, having someone carry out regular outdoor maintenance won’t just leave your place looking better, it’s also usually tax-deductible.
We also provide each of our clients with monthly and annual income and expense statements, showing exactly what they’ve made and spent. These are essential when it comes to understanding where you stand come 30 June.
Get in touch
Get in touch if you’d like any help.