As the end of the 2017/18 tax year fast approaches, you still have time to implement some smart strategies that will maximise the benefits of owning an investment property.
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Whether you’re a long-time investor or a new landlord, Angus Raine, executive chairman of Raine & Horne offered the following tips for Mercury readers:
Claim all your deductions
The cost of expenses incurred by a landlord including maintenance and repairs, property insurance, accounting fees and more can be claimed as legal tax deductions.
While the tax rules are mostly favourable to property investors, it is your responsibility as a landlord to take advantage of all available deductions to maximise investment.
Check in with your accountant
If you haven’t already, find a qualified accountant who specialises in property to prepare your tax return.
Enlisting the services of a professional with up-to-date knowledge of the tax code is a wise investment.
Capital improvements vs deductions
Understanding the difference between a ‘capital improvement’ and a ‘deductible item’ is important.
If a landlord repairs a deck, for example, it is classified as maintenance work and is therefore fully deductible.
However, a newly constructed deck is deemed a capital improvement and is subject to depreciation, rather than a straight deduction.
Acquire a depreciation schedule
Industry research suggests 80 per cent of landlords fail to claim the maximum depreciation deductions available from their investment property.
Depreciation is the wear and tear on the property, which is typically claimable at 2.5 per cent annually for up to 40 years.
However, depreciation is relatively complex, so it is well worth considering enlisting a specialist quantity surveyor to prepare a ‘Tax Depreciation Schedule’ for your investment property.
Moreover, the expense involved in getting a depreciation schedule is tax deductible.
Get your paperwork in order
Another way to make tax time easier is to find a filing system that works for you.
Avoid a last-minute rush, and extra accounting fees, by getting your records and receipts in good order.
You may even consider using a program that allows you to store your documents electronically by scanning receipts with your smartphone.
Other suggestions
Meanwhile, Angie Ritchie, director of Illawarra and Shoalhaven-based agency Zest Real Estate also offered some advice for investors in the lead-up to tax time.
“Owners should arrange their agent to pay all their expenses, ie. rates, levies, maintenance, etc, throughout the year, so it is all collected in the one statement,” she said. “So, when you visit your accountant at the end of the year, everything is compiled.
“Your agent should give you an end of financial year statement, which compiles everything, and makes it simpler to take to your accountant.”
