The end of the financial year (EOFY) is fast approaching, and although June 30th seems a while away, you need to give yourself enough time to make the most of the deductions and benefits for your investment properties.
EOFY is known to be a busy time of the year for most individuals and businesses who need to get their paperwork in order. Therefore, it might be worthwhile to stay ahead of the game with these simple tips that are sure to make your life a little easier and your investment more profitable.
Evaluate cash flow
The end of the tax year is a good time to review how your property has been performing over the year. When you take stock of your outgoings, ensure to include the mortgage. If you have selected interest payments, you will be able to claim a deduction for it.
You need to consider if the property is haemorrhaging cash in unnecessary areas and find out if these can be disposed of. If you begin now, you will have enough time to review and cut out or minimise redundant costs. It is important to go through your budget before the end of the financial year in order to protect your income.
Identify what is tax deductible
When it comes to property investments, tax deductions play an important role in cash flow management. They can have a huge impact on your bottom line and you need to be diligent about making sure you cover all the possible deductions allowed by law. Now is a good time to get your checklist in place in order to ensure a positive cash flow.
Here are a few expenses that are considered tax deductible and can be claimed:
· Advertising for tenants
· Amortisation of borrowing costs over 5 years
· Agent management fees
· Bank fees on investment loan or rent account
· Body corporate fees and charges
· Building write-off on construction costs
· Council rates
· Depreciation on plant & equipment
· Water charges
· Land tax
· Gardening and lawn mowing
· Pest control
· Interest expenses
· Property agent’s fees and commission
· Some legal expenses
· Repairs and maintenance
· Depreciation on assets like whitegoods
You will need to refer to the Australian Taxation Office (link: https://www.ato.gov.au/General/Property/Residential-rental-properties/Expenses-you-can-claim/) website for a complete list of claims to suit your needs.
Review your insurance
Your insurance should fall under the category of expenses that can be claimed, so have a look to see if it can be deducted. Also, remember that you have the option to prepay any expenses that are related to the next financial year like your insurance premium.
Prepone anticipated repairs
If you can foresee repairs needed over the next few months, consider moving them forward to June. It is important to differentiate between repairs and improvements when identifying expenses that can be claimed. A repair is considered a partial fix to restore something to its original state. An improvement, on the other hand, will add value to that thing and enhance its original state. While repairs can be claimed entirely, renovations are classified as capital improvements and can be claimed only partially.
Seek professional advice
Although you may be more than capable of filing your own returns keeping the above top-line tax pointers in mind, it might be worthwhile to take the advice of an accountant after taking your current financial position into consideration. They can streamline the entire process and are experts in pointing out costs that can be claimed. Considering the amount of time and research you will have to put into filing your returns, it would be a shame to miss out on added cash benefits.
If you start looking for an accountant right now, you will have more than enough time to find the right one and get all the paperwork together in order for them to maximise your returns.