It's been a fantastic year for many property investors, with Australia's housing boom rolling on for many real estate markets around Australia. Housing markets around Australia continued to surge, with CoreLogic's national Home Value Index up almost 11% this year, led by Darwin with a whopping increase in values of 20.3%.
But at the end of the day, capital growth is only part of the equation. With the end of the 2020/201 tax year fast approaching, there is still time to consider some savvy strategies that will further maximise the benefits of owning an investment property.
So, whether you're a long-time investor or a new landlord, take a moment to acquaint yourself with the following tax tips:
The expenses incurred by a landlord, including maintenance and repairs, property insurance, accounting fees, and more, can be claimed as tax deductions. While the tax rules are cam help you maximise the returns from your investment property. However, as a landlord, it is your responsibility to take advantage of all available deductions to maximise investment.
If you don't have a qualified accountant who specialises in property to prepare your tax return, ten get your skates on and find one. Employing the services of a professional with up-to-date knowledge of the tax code is a wise investment.
Grasping the distinction between a 'capital improvement' and a 'deductible item' is essential, and your accountant should be able to help you understand the difference. For example, if a landlord repairs a deck, it is deemed to maintenance work, which allows you to fully offset this expense against your 2020/21 income. On the flip side, if you build a new deck, this expense is deemed a capital improvement and is subject to a "depreciation" claim over multiple years rather than a straight deduction.
Depreciation is simply the wear and tear on the property and its fittings and fixtures. Depreciation is typically claimable at 2.5% annually for up to 40 years. However, depreciation is relatively complex, so consider engaging 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.
Another way to make tax time easier is to get your paperwork in order using a filing system that works for you. Avoid a rush on 29 June, and extra accounting fees, by getting your records and receipts in good order now. Perhaps there is a program that allows you to store your documents electronically by scanning receipts with your smartphone.
The good news is that you won't need to worry about chasing up your Raine & Horne property manager for a statement showing all the costs incurred during the year.
These statements will be sent close to the 30 June deadline and include property management fees, advertising, and maintenance work. This information, along with your depreciation schedule. will make you extremely popular with your harried accountant come tax time,
For more tax time tips, contact your local Raine & Horne Property Manager.