The end of financial year is on the way and if you’ve got an investment property, it’s time to get organised. Here’s what landlords need to know about preparing for EOFY.
Managing all the nuts and bolts of your investment property can be time-consuming, but there’s one thing you can’t ignore: preparing for end of financial year.
First up, you’ll need an accountant who specialises in real estate and property investments. It’s a niche area and you want to be sure your accountant knows exactly how to help you get the most return out of your investment property, especially when EOFY rolls around.
Getting Your Paperwork In Order
Being organised is key for sailing through EOFY and working out your capital gain / loss on your property. This will also ensure you only pay the tax that you need to. It’s also the time to be working out your capital gain / loss on your investment property if you’ve sold the property within the financial year.
We suggest starting by having an easily accessible file for each investment property that includes your records of ownership, contracts of purchase and sale, conveyancing and loan documents and records of every transaction over the period of ownership.
Maximising Your Tax Return: 4 Things To Consider
The good news is, there are actually lots of other things you can do prior to EOFY to help maximise your tax return. Each investor’s situation will be slightly different, but here’s what to chat to your accountant about:
1. Negative Gearing
If you’ve negatively geared your property (ie, borrowed money to invest and the income from your investment is less than the expenses on the property), you can offset the loss from negative gearing against the rest of your income so you reduce the amount of tax you pay.
However, be aware that you can only make a claim during the time the property is rented. If you have lived in the property for several months and rented it the rest of the time, you can only claim for the time it was rented.
2. Keep Track Of Those Expenses
A paint job, putting in new appliances or adding air con can all make your property more appealing to prospective tenants (and raise its value). And timing these property upgrades to occur just before tax time could mean more potential deductions coming your way. Don’t forget even the little things – such as changing light bulbs or fixing a broken sliding door or hot water system – may also be tax deductible.
3. Figure Out What You Can Claim
Landlords can actually claim a great deal – just make sure you’ve kept the receipts. You can claim cleaning costs, garden upkeep, maintenance costs and advertising for tenants. You can claim running costs such as council and water rates, which are charged once the property is ready to be rented out.
You can claim interest on funds that relate to your investment property, insurances such as landlord insurance, building and contents and public liability. You may be able to claim property management fees, body corporate fees on strata, ongoing expenses and capital works (anything that improves the value of your investment property).
4. Get A Depreciation Schedule
Want to save on the tax you pay? The ATO lets property investors deduct the cost of depreciation from their overall income – which could mean thousands of dollars in tax deductions.
If you haven’t got a depreciation schedule, you’ll want to organise getting one from a registered quantity surveyor before EOFY. The surveyor will look at the entire property, including the floors, appliances, blinds, carpets, furnishings (if your property is provided furnished) and any renovations you’ve done. Find out more about depreciation schedules here.
If You’re Time-Poor And This All Seems Overwhelming…
You’re not alone! Managing an investment property, dealing with tenant issues, handling maintenance and maintaining records takes time. A professional property manager can take the pressure off and keep things ticking over – whether that’s sourcing great tenants, monitoring your rental income and offering suggestions for maximising your property’s potential (and getting higher rental returns).
A good property management company will also keep meticulous records and provide you with an income and expenditure report to ensure EOFY is a seamless process.
Need Advice On EOFY And Managing Your Investment Property?
Contact our team of specialists today.