June brings not only the start of winter, but also the last month of the financial year. Being organised with your tax documents for your investment property, will allow your accountant to lodge your annual income tax return in a hassle-free and smooth process.
Are you wondering if owning an investment property even impacts on your tax and financial situation? Watch this video as Joanne Danckwardt gives a brief overview on what may be involved, and how it can affect your financials.
There are many considerations when renting out your property, with great tax benefits and investment property tax deductions being one of them. It is important for property investors to understand their requirements to ensure they get the most out of this year’s tax return.
If you're ready to discover how you can rent out your property with confidence, download our free Step By Step Checklist to Renting Your Property with Confidence.
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To ensure that you maximise your return and gain the maximum benefit from your investment property, here are our 7 tax time tips for your end of financial year preparation:
1. Know the income you are required to declare
Have a clear idea of the income you need to declare. The main income stream will be rent received. Consider any other additional income such as money received from bond refunds, insurance payouts or any additional lump sum payouts associated with your property.
2. Understand what costs you can claim
Know what is deductible and what is not deductible on your investment property, and keep clear and concise record of these expenses. If your property is managed by a real estate agency, you should receive a detailed End of Financial Year statement to assist with this, but it may not contain all your costs the property has incurred throughout the financial year.
For your investment properties make sure you have considered the following:
- Council and Water Rates
- Strata Levies
- Insurances
- Agent fees
- Bank fees
- Borrowing costs (eg. Mortgage insurance, application fees etc)*
- Repairs and Maintenance, (eg: pest control, electrical, and plumbing)
- Interest on loans
- Depreciation*
- Travel expenses
- Renovations or improvements*
- Land Tax
*Some of these items are not eligible for an outright tax deduction but may be depreciated over a period of time.
3. Recognise the costs that you can’t claim
Expenses paid by the tenant cannot be claimed, nor can any expenses that have accrued through your personal use of the property. In most Australian states, you are unable to claim expenses relating to buying or selling of the property, such as the purchase price, conveyancing and advertising costs, building inspections and stamp duty. However, these costs can form part of the cost base of the property. For more information on this, we recommend you contact your accountant.
4. Capital gains tax
Most investment properties will be subject to capital gains tax when the time comes to sell the property. Speak with your accountant to see if you may qualify for an exemption on this tax.
5. Ask Questions
Do not be afraid to ask your accountant questions – find out what they are doing and why. It is your accountant/tax professional’s job to not only to prepare your tax return but help you to understand tax implications of your investment property. If you understand why your accountant needs particular information and documents to complete and finalise your tax return this will save you a lot of time in preparing for the next financial year. Consider making use of the experience and knowledge of your agent, by having a list of questions to ask your Property Manager.
6. Check your tax return
Take the time to read through and check your tax return before signing it.
7. Make sure to save your records
The Australian Tax Office requires all property investors to keep records such as their purchase contract, all documents relating to capital gains tax, financial records and evidence of any expenditure on property improvements. We recommend you file them in a safe spot, so that they are easily accessible should you be required to produce them in the future.
Please be aware that this is general advice only. For more information specific to your individual financial circumstances, speak to a trusted financial professional and make sure to consider all of your options before making any final decisions.
If you're ready to discover how you can rent out your property with confidence, download our free Step By Step Checklist to Renting Your Property with Confidence.
YES, DOWNLOAD MY CHECKLIST
If you feel you could benefit from our experience with property management, we’d love to hear from you. Simply reach out. I hope that has helped you today. If you have any questions I’d love to talk to you. My number is 0426 264 771. I look forward to talking to you soon.
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