Property Tax Tips for Real Estate Investors at EOFY

Property Tax Tips for Real Estate Investors at EOFY

Posted on June 20, 2022 by Mirren Property Investment

If you’re a real estate investor, the end of the financial year (EOFY) can be a rewarding time with all the tax incentives. And with tax time just around the corner, it’s so crucial to start your planning now. To make the most out of all your investment opportunities, we’ve compiled a list to help you.

Understand What and When You Should Claim

Find out which claims are deductible and what isn’t. You should know by now that being a property investor allows you to extend property claims more than just the property itself. There are many items that you can forget to include when you’re sorting out your tax deductions. So, make sure you know what these are.

Know What You Can Claim as Tax Deductions

Did you know that 80% of investors don’t calculate their deductions properly? This results in a huge loss on significant tax-saving opportunities. If you’re not sure what claimable deductions are available for you, here’s a list:

Claimable Deductions:

● Repairs
● Improvements
● Advertising for tenants
● Cleaning
● Gardening
● Water charges
● Electricity and gas
● Pest control
● Land tax
● Lease costs
● Telephone
● Security monitoring costs
● Capital Works

Pre-Pay Your Interest

If you have a fixed-rate loan, you can pay the interest now for the next 12 months. Doing this will help you earn a tax deduction for this financial year. It can also help you with cash flow and
budgeting by using a lump sum available rather than having to pay regular interest throughout the year. Furthermore, if the interest rate rises over the next months, pre-paying can actually help you enjoy a more discounted interest rate.

Claim Depreciation

Another major tax benefit for property investors is depreciation. So, if you don’t have a depreciation schedule, make this happen now. Quantity surveyors can create a depreciation schedule for you. According to statistics, almost 50% of property investors fail to make depreciation claims which make them lose thousands of dollars yearly.

Okay, but what is depreciation? Depreciation happens when an item’s worth becomes less over time. When you’re filing for a tax deduction, depreciation is the method of allocating the cost of the item over its useful life.

For example, if you have an investment property with a refrigerator that’s worth $2000, you can claim $200 against your taxable income for 10 years on that item. There are items that have depreciation and others that don’t so it’s important to know what you can claim. Here’s a helpful guide to types of depreciation tax deductions.

● Equipment Depreciation – items within the building such as air conditioners, hot water heaters, carpets, blinds, etc.
● Building Allowance – refers to the construction cost of the building including the concrete, brickwork, etc.

To make tax claims for depreciation, you need to create a report that identifies all the things against your tax and their current value.

Claim Finance and Insurance Costs

Property investors can claim finance costs related to their property investment. This includes bank charges, borrowing costs, and loan interests. These are all tax-deductible.

Hold Onto Your Receipts

Being organized can save your life when it comes to sailing through your EOFY. Compile all your paperwork, including your records of ownerships, contracts of purchase and sale, loan documents, and most especially your property-related receipts.

Don’t throw them in the bin and keep a physical and digital record for yourself. Some of the most organized people even have a spreadsheet of all their expenditures. You’ll need to show proof of them later so that your profited amount can be added to your taxable income. This will make computing taxes easier and less stressful for you or your accountant when the end of the year looms.

Review Your Loans

Make sure any interest-only periods are not going up for expiry if you hold a loan on an owner-occupied property. Review your loan and insurance deals and compare them to other deals in the market to make sure you’re getting the best deal.

Be Aware of Tax Refunds Scams
Plenty of scams target property investors during tax time. So, it’s really important to be wary during this time of year. Tax scammers claim lots of dubious things including you overpaying your taxes, underpaying your taxes, or claims of administration fees. Do not give your credit or debit card details — or send money through a transfer with these scammers.

Hire a Good Accountant
Nobody enjoys all the paperwork that goes with tax filing, so if you’ve got money on your hands why not hire an accountant? EOFY can be difficult to navigate without seeking professional help. To do this correctly, choose an accountant that suits your investment needs. Preferably, an accountant that has experience working with property owners. Also, make sure that your accountant has the knowledge and experience in various important
taxation laws. They’ll know how to maximize your tax deductions and know the benefits you can get from owning an investment property. They can also give you valuable tips on making the right investments in the future and things you can do to improve your cash flow. If you hire
someone that isn’t familiar with property investments, you’ll have a hard time maximizing your savings.

EOFY is fast approaching so it’s best to act fast. Don’t do things until the final days. Start filing your taxes before June 30. A little bit of planning can go far when it comes to saving more of your hard-earned income.

Planning your next move in your investment properties journey? Contact Mirren Investment Properties for a strategy meeting.