With the financial year approaching very soon there is no much time left to organise the management of your rental property to get the most benefits in current tax year. All it comes to the the tax planning. The listed below general tips are aiming to create understanding of what can be done before the end of financial year to secure better tax position.
The purpose of these tips is to prompt the thinking before 30 June 2017. If there is some uncertainty please seek a professional advice from the accountant who will be able to evaluate your personal circumstances and design together with you an action plan considering where you are likely to be at the end of the financial year but more importantly where you would like to be. Care must be shown to the recommendations below :
- Review your personal circumstances before prepaying any rental expenses.
- Raise questions to determine whether maintenance or repair is deductible or it is considered a renovation of a capital nature.
- Consider selling any assets which have lost value and their future is bleak to reduce capital gain generated on sale of property or other assets during the year (if the property with the capital gain have been already sold earlier during the same financial year)
- Time your actions according your personal circumstances – don’t follow the suggestions blindly. Instead, get in touch with the accountant first.
These are some practical steps that can be done in relation to the general tips above. Not all of them can be applicable to the every single property.
- Depreciation schedule – For the rental properties built after 18 July 1985 the depreciation schedule is a must. Quantity surveyors will come and inspect your property and prepare the depreciation schedule to be used by the accountants when completing the tax returns. The schedule usually provides significant benefits. The newer is the property the more benefits the owners get. On top of that, the fees for quantity surveyor’s services are tax deductable too.
- Minor repair – Invest in the minor repair of rental properties before the end of the financial year. Talk to your rental property manager and ask them to give you the list of small items that needs repair.
- Capital improvements – if there are significantly big jobs that needs to be carried out on your property, then you better initiate them now. By paying for the goods and services before the 30 June, you will manage to depreciate capital improvements in current year tax return.
- Keep the receipts – no proof of purchase, no claim. It is handy to pay all services using credit card which will allow the expenses to be reflected on the credit card statements.
- Prepay the interest – this will allow to minimise the taxable income in current financial year if your earnings are high this year and there are some chances that your income will drop by next year.
- Gardening and cleaning – if the property needs a refresher, this is a time to do it to gain the immediate deductions this year.
- Land tax, council and water rates, body corporate fees – Ensure that all these rates and tax are paid before end of the financial year. If your property manager pays these bills on your behalf from the collected fees of tenant, please follow them up to ensure they are paid.
- Landlord and content insurance – something to consider and pay now, if you still were undecided about it for a while.
- Defer Capital Gain Tax – if you are working on selling your investment property, please consider to finalise the deal after 1 July 2017 as this will give you an opportunity to push back your possible tax bill.
- Engage a knowledgeable accountant – Clued-up accountant is gold when it comes to saving the tax. Remember, you are getting a tax deduction paying to smart accountant to save you in tax, but you are not getting a tax deduction paying high tax. So which one would you choose?
Armine Stragan is a tax accountant at Stragans Accountants and Business Advisors. She can be contacted on 03 9484 5442.
You can also visit their website www.stragans.com.au or their Facebook Business Page https://www.facebook.com/Stragans-Accountants-Business-Advisors-175368322541592/