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Top tips for property investors at tax time

Metricon

One of the best aspects of being Australia’s number one builder is witnessing firsthand how many of our incredibly driven customers create impressive businesses of their own, investing in and building up a property portfolio.

If that’s the path you’ve chosen, it’s worth bearing in mind some of the possible tax deductions you might be able to make against your property investment business this end of financial year. Because who doesn’t love potential savings?

Read more about how to get started in property investment here.

Trust the experts

When starting out in the property investment game, it can feel overwhelming come tax time with so much to figure out on your own. Our top tip is don’t. Trusting the experts is the best business advice you’ll ever get. Ask around friends who invest, research online and read reviews to discern who might be a good fit for you. Investing in the best financial advice from accounting professionals will pay dividends beyond what you could sort out flying solo through the twisty-turny trials of tax law.

Keep good records

The best way to help a tax agent help you is to keep a diligent record of everything related to your investment property, from the purchase details to repairs and maintenance and, of course, any rental earnings. The latter is essential when figuring out if your property is negatively geared: in other words, you’re paying more on your mortgage and property upkeep than you’re making in rent from your tenants. Doing this as you go along should become second nature if you want to make your tax filings fly by like a breeze.

The best thing to do is keep all receipts in one place, scanned online ideally, and be ready to present come EOFY. The better records you keep, the more likely a gun tax professional will be to navigate all your entitlements in a way that has you jumping for joy when all the Ts are crossed and the Is are dotted. And if you do get audited – don’t panic, it happens – you’ll be able to pull all the evidence together easily to back up your claim.

Get organised

If you own an investment property, think about what needs to be updated, repaired or replaced and plan out when that might work best for you. Aiming for near EOFY is sensible so that you can present the bills to your tax agent, and they can easily check if you’re eligible for deductions on a quick turnaround.

But that means planning ahead, factoring in the time it takes to find a suitable contractor and book them in, and budgeting to pay them upfront. That is unless you’re super-handy and servicing it yourself, in which case you’ll want to keep the receipts of any materials you purchase.

Prepare for the worst

If you have tenants in, unexpected repair jobs might pop up at any moment. And, if you find yourself needing to arrange urgent tradespeople services during late hours, it could result in substantial unexpected expenses. That’s why it’s so important to have a good financial buffer in the form of a savings account you contribute to for rainy days (like a sudden leak in the roof during a wet winter).

Again, keep the receipts whenever you have to work on your investment property! At the risk of sounding like a broken record, your tax agent is the best person to rely on to make sure you can claim eligible entitlements when it comes to preparing your EOFY return, and the more information you can provide, the easier their job will be, ultimately benefitting you.

Remember, you mean business

Many of us increasingly work from home these days, including property investors, so keep a note of any legitimate business expenses in running your home office. That could include new equipment like a printer and the ink to run it, a laptop, or a desktop computer. It’s a great idea to invest in new WFH stuff during the EOFY sales when you’ll not only be able to snag a bargain but possibly be allowed to claim it back on tax soon after buying too.

A tax person should be able to help you sort out what you can and can’t claim for as a legitimate business expense. These deductions may cover partial utility costs, including your mobile bill, gas and electricity.

Sealing the deal

If you’re at the stage of selling your first investment property, you could be looking at a tidy takeaway given that house prices have been steadily climbing in Australia. If so, you’ll more than likely have to pay capital gains tax on that profit, though granted if you’ve owned the house for over a year, the amount owing could halve.

One last time, it pays to get great financial advice from a registered tax expert because, to borrow the turn of phrase from Spider-Man, with great profit comes great responsibility. If you’re going to get into property investment, you need to make sure you play by the rules.

While we’ve tried to be as helpful as possible, this article should not be considered professional financial advice. It contains general information only, and you should seek independent, professional advice on your personal situation before making any financial decisions.