Property investors know what a hectic time end of financial year (EOFY) can be. However, with a little forward planning, you will be well on your way to a smooth tax lodgement.
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1. Records you should keep
From July 1 to October 31, you will need to lodge your tax return for the previous income year. If you're using a registered tax agent, you may be able to lodge later than October 31.
Regardless, you need to have on record up-to-date correspondence, income and bills related to your investment property over the period you own it including rental income, deductible expenses and documents relating to ownership of the property, including all purchasing and selling costs.
Documents pertaining to rental income and deductibles must be kept for five years and any documents relating to property ownership need to be kept for five years from the date you sell your investment.
If you have a property manager, they will likely provide you with an EOFY summary. If you misplace a receipt or invoice, the ATO allows you to substantiate your claims with a bank statement. Having these documents handy, whether in a physical or digital file, means it will be easier to make accurate calculations come tax time.
2. Not all accountants are equal
According to the ATO, a common mistake investors make is choosing an accountant with limited property experience.
What deductions property investors are allowed are subject to change, and if you don't have an accountant who understands property, you could be in for a shock.
For example, a landlord can no longer claim travel deductions for inspecting, maintaining and collecting rent.
Take the time to find out your accountant's experience or level of expertise.
3. To claim or not to claim
If you are DIY-ing your tax return, or working with an accountant, a good understanding of the ins and outs of the tax rules is important.
For instance, you might want to bring forward expenditure to before June 30, if you're planning repairs for your property.
Before doing this, however, determine whether the job is deductible as a maintenance or repair, or if it is considered a renovation or of a capital nature. The ATO's guide on how rental property owners need to treat rental income and expenses is at ato.gov.au
As a rule of thumb, things you may be able to claim for immediate tax deductions include rates and taxes, including council and water rates and land tax, repairs and maintenance.
Some tax deductions you can claim over several years include capital works or building costs and borrowing costs.
It might also be worthwhile to engage a qualified quantity surveyor to create a depreciation schedule. This allows you to claim the depreciation of fixed items within your property including carpets, blinds and fixed appliances, reducing your taxable income.
Despite being one of the busiest times of the year, EOFY is a great opportunity to review how your investment property has performed, check in with your mortgage broker to ensure your existing loan is still servicing your needs and discuss future plans to expand your investment portfolio.
Olympia Andronicos is a credit representative (507463) of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence 391237). Choice Finance Specialists 0418 690 628.