Tax time - it’s the point of the year which many Aussies will greet with a sigh of frustration. But tax time doesn’t have to be a pain, in fact, for one group of Australians it offers an opportunity to take advantage of some serious perks.
According to ING’s 2016 Financial Wellbeing Report one in five Australians own an investment property, but aside from the rewards of rental income and capital gains, investors can also claim a number of useful deductions at tax time.
So if you’re wondering if you’re reaping the full tax benefits from your own investment property, read on for three tips from industry experts:
Claim your landlord costs
Given that many Australians, particularly those who own multiple properties, may not live near their investment property or don’t have the time to manage it themselves, a property manager who looks after rent, tenants and all the day to day affairs will be an essential outlay.
While this may seem like a hefty cost, the good news is that as an investment property owner, you may be able to claim back some of the money you spend on property management, not to mention other landlord-related costs come tax time.
“As an investment property owner, it is important to know that there are a range of expenses you can claim as a deduction,” said Chief Executive Officer of BRICKX, Anthony Millet. “Many landlords, for example, might not know they can claim tax deductions on tenancy costs including the cost of advertising for a tenant and property management fees.”
Hire a depreciation specialist
As any homeowner will know, maintaining a property isn’t easy. Things break, homes get old and they need to be repaired.
But whether it’s an aging roof or indoor fixtures such as carpet or tiles, CEO of BMT Tax, Bradley Beer, says that many property investors don’t take advantage of the generous deduction possibilities on offer through depreciation.
“On average, investors can claim between $5,000 and $10,000 in depreciation deductions in the first full financial year alone,” he said.
“Often, we see scenarios where an investment property owner has been renting out their property for a number of years, but they haven’t claimed or maximised their depreciation. In fact, research suggests that 80% of property investors fail to claim the maximum depreciation deductions they can claim.”
To ensure investment property owners make the most of their deductions, especially given the changes to depreciation tax in the 2017 Federal Budget, Beer recommends enlisting the help of specialists like an accountant and quantity surveyor.
“A comprehensive depreciation schedule prepared by a specialist Quantity Surveyor is necessary to ensure that the maximum depreciation deductions an investor is eligible for are claimed.”
Consider renovations and repairs
Is your investment property in need of a bit of TLC? Whether it’s a proper renovation or some minor alterations, Mozo Property Expert, Steve Jovcevski, says investment property owners should avoid missing out on renovation-related deductions.
“Many investors won’t be aware that they can claim for any type of expense associated with an investment property, which includes repairs or even doing renovations. That means if you had any work done on your property in June, you’ll be able to get a refund on it as early as this month,” he said.
What if you have a project in the works but you haven’t actually started renovating though? Well if you made a trip to the hardware store in the last financial year to buy supplies, you may be in luck when it comes to claiming expenses.
“As long as you bought the materials for your renovation before the end of June, those materials will be tax deductible,” said Jovcevski. “You won’t necessarily have to start the renovation straight away if you don’t want to, but you will be able to claim them.”
But don’t limit your savings to tax deductions this new financial year. If you haven’t recently checked the rate deal you’re getting on your home loan, now could be the time to compare options and switch to a cheaper investment property loan.