Top Tax Tips for Property Investors

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Reproduced with permission.

Tax time means making sure everything’s in order to reap the maximum rewards of having an investment property.

Documentation
It’s time to rustle through that empty shoe box of cheque book stubs, credit card receipts and bank statements to ensure you claim for all of your expenses.
There might be some expenses you’re not aware of, but a good accountant who understands property investment should be able to help you with this.

Depreciation
Probably the most forgotten claim (and in some cases, the most beneficial), is the opportunity to claim depreciation of your assets. You should have a quantity surveyor finalise a depreciation schedule for you. It may cost around $300 to $400 but you should get a lot more than this back in benefits.

Most investors think that you should have a depreciation schedule only if you own new property. However, older properties can have significant depreciation benefits, especially if renovations have been undertaken in the last 10 years or so.

Travel
Travel expenses can be particularly beneficial if you own an investment property a long way from home or interstate. But be careful! If you own a property on the Gold Coast, you can’t claim 100% of the expenses for your two week family holiday to the Gold Coast. You can only claim a proportion of the expenses, depending on the circumstances. Your accountant should know what you can and what can’t claim for.

Capital Gains Tax (CGT)
The timing of a sale of property can determine when you pay your capital gains tax (assuming you made a capital gain). If you finalise a contract to sell a property on 30 June, your capital gains will be calculated in addition to any other income you’ve earned and will be payable in that financial year.

However, if you finalise the sales contract on 1 July, just one day later, capital gains tax will be incorporated into the new financial year’s accounts and you can possibly delay the payment of your CGT by more than 12 months.

PAYG variation
Did you know that you could receive the benefits of your annual tax return on a weekly basis?

Instead of waiting to get your tax refund, you can submit an application form to the ATO to vary your income tax. For example, instead of waiting to lodge your tax return to get back $5,200, you can lodge a form and have $100 less tax taken out every week. It works out to be the same money but $100 per week extra for 52 weeks in your account can greatly help with your cash flow, especially if you have a negatively geared property.

Accountant
If you own investment property, you should find yourself a good accountant that understands property. When looking for an accountant, one of the first questions you ask should be “Do you personally own property?”.
If the answer is no, keep looking!

Happy House Hunting!

Written by Peter Koulizos, university lecturer, author and buyers advocate.

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