BE PREPARED: Tips for investors getting ready for EOFY
When the end of financial year approaches every investor should ask themselves, “Am I gaining as much as I should be out my investment property?”
Below are strategies that RE/MAX Precisions Sales Agent and Principal Scott Mackey suggests that investors should put in place before June 30 rolls around.
1. Repairs vs. replacements vs. capital improvements
This area is often targeted by the ATO and causes confusion for taxpayers.
A repair is tax deductible in full if it relates to fixing items back to its initial condition whereas replacing an item is not commonly deductible in full, but can be deductible over time in the form of a capital write-off or deprecation.
A capital improvement is not deductible in full; however it can be subject to a small capital write-off and forms a part of the cost-base of the property.
2. Interest expense
Interest on a loan can be tax deductible providing that the investment property is advertised as a rental and available to rent.
You can prepay up to 12 months of interest on a loan and claim a deduction of the prepayment for the financial year.
The deduction for your loan is only available if the loan was used on an income producing purpose, if you used a percentage of your loan to buy a car (for private use) as well as an investment property then an appointment of interest will be required.
Was your investment property built less than 25 years ago? Chances are there should be some capital write-offs on the early construction costs or if there have been major capital renovations on the property.
Additionally items such as airconditioners, stoves or ovens, hot water systems and dishwashers may also be available to gain on.
Around this time of the year it can be well worth a quick phone call to Qualified Surveyor so they can prepare a depreciation report.
If your property is newly constructed it is very highly recommended to obtain a deprecation report.
The cost of deprecation reports are also tax deductible.
4. Travelling Costs
If you had to travel to inspect an investment property over the last financial year you could be able to claim travelling cost provided the trip’s purpose was entirely to inspect the property. Keeping a good trace of any travel or a diary can help with claims.
5. Holiday Homes
Investment properties for this use typically have private usage involved.
If the property is not available at peak holiday letting times and is used privately the holding expenses such as rates, water and interests have to be measured on the number of days used privately and not available for renting.
It is recommended to keep a written record of the private usage so you are able to provide this to your accountant.