April is always a great time to start tax planning as it provides breathing space to make tax-deductible purchases while also preparing for the end of year tax deductions. Being organised and knowing what you are entitled to will mean a better and more accurate tax return!
Tax deductions
As a property investor, its pays to ensure you claim the tax deductions you are entitled to. We recommend having a qualified professional draw up a depreciation schedule, which will help outline how much your eligible to claim in depreciation at tax time. Also, it’s important to remember to keep records of all receipts and bank statements related to your investment property and have these on hand to pass onto your Certified Practicing Accountant at tax time.
You may be thinking that these services all add up, but in reality, the deductions you can get in the end makes the initial outlay worthwhile, and the service itself is tax-deductible.
Understanding what you can and cannot claim is half the battle and it’s always best to discuss possible tax deductions with your accountant or tax agent. Be sure to get the advice from accredited professionals, as they can look at your individual financial situation, pick out deductions that you may not have even been aware of, and ensure you do not make an error that could land you in hot water.
Under Australian Tax Law, for an expense to be eligible, there must be a relevant connection between your rental income and rental deductions. You can claim back an expense that you incur from owning a rental property.
So, what you can claim on tax?
- Interest incurred on your loan;
- Property management fees;
- Council and water rates;
- Home maintenance and repairs expenditure;
- Some costs associated with the tenant, like advertising costs;
- Insurances;
- Accountant, tax agent or business-related lawyer fees;
- Depreciation on whitegoods and other durables, such as the air conditioner.
What can't you claim?
- Expenses associated with your personal use of the property;
- Travel expenses to inspect the property - this used to be a claimable up until last year - so don't get caught out in 2019!
- Costs relating to the purchase or sale of the investment property (although these costs may be eligible to be included in the cost base, with sufficient records);
- Utility bills the tenant has paid; and
- Borrowing costs.
Land Tax
If you’re a keen investor or own multiple properties, just the term ‘land tax’ can be enough to send shivers down your spine! So, what is it? Land tax is calculated depending on the unimproved value of the land that you own, excluding your primary residence, on June 30.
When it comes to land tax, it’s important to keep in mind that whether or not you “own” the property is based on the date specified in the contract, not the settlement date.
If you’ve recently bought or are planning to buy a property, keep in mind that if you are yet to sell your existing primary residence then you will be required to pay land tax on your new property come June 30. This isn’t ideal, not to mention if your new property is an upgrade!
We strongly advise that you plan the buying and selling of property in advance to avoid this cost shock at tax time.
Federal Budget
The 2018 Federal Budget was realised in early May. We recommend staying up to date with budget news which may affect your investment property You can check out the latest media releases and tweets here at www.budget.gov.au
Follow the rules and declare
Thinking you can get away with making false claims or not declaring income and capital gains is a huge no-no. It’s not a matter of ‘if’ you’ll be caught, but ‘when’, so if there’s one piece of advice you take with you from this article, it is to stick to the rules!
Of course, our experts at Peard Finance and Peard Financial Planning are always here to help!
The information contained herein is for informational purposes only and should not be solely relied upon as financial advice. Please contact Peard Finance for an individual assessment of your finances today.