Puzzle Finance Blog


Unlock a tax break


 Two-thirds of Australia’s 1.8 million landlords report a tax loss on their properties – those losses totalling more than $13 billion, according to Australian Taxation Office data. In the lead-up to the end of the financial year, it’s worth checking you are getting your full entitlements from your investment properties.

Any investors who expect to earn less next year should investigate what they can prepay before June 30. The biggest is likely to be 12 months’ interest on the mortgage.

And if you don’t have a depreciation schedule, organise one now and pay for it before June 30. Anyone who has a house built after July 18, 1985, needs one to maximise their deductions. They are also worthwhile for older houses that have been renovated, as explained later.

Organise repairs and, as long as these cost less than $1000 and you trust the tradesman, pay for them before June 30 to score a deduction this tax year even if they won’t be completed until later.

It’s important to distinguish between repairs and maintenance and improvements, because the latter do not generate immediate deductions, although they can be depreciated over time. The ATO provides a good guide to help you understand the differences (see www.ato.gov.au/Individuals/Ind/Rental-properties---claiming-repairs-and-maintenance-expenses).

Other expenses which can be claimed include paying a gardener to maintain the outdoor area and administration costs.

Even if prepayments are not on your agenda, the end of the tax year is a good time to take stock and make sure you are claiming everything you can.

If your investment property was built before 1985, you may not have bothered with a depreciation schedule, but it’s likely that a home 30-plus years old has undergone some improvements, which would be depreciable. And even if that is not the case, Tyron Hyde, director of quantity surveyor Washington Brown, points out your property’s purchase price includes land, building and plant and equipment (fixtures and fittings) and firms like his can help you break down those categories. “In about 99% of the cases we can find enough plant and equipment items to justify the expense of engaging our firm,” he says.

Landlords planning kitchen or bathroom renovations on properties built after 1985 should engage a quantity surveyor before they demolish, says Hyde, so the residual value can be assessed. For example, a rental property with a 20-year-old $10,000 kitchen attracts an immediate deduction of around $5000 when it’s demolished. If you have been missing out on building and depreciation claims, the good news is that you can obtain a schedule and claim up to the previous two years. For the average cost of around $660, which is itself tax deductible, it’s well worthwhile.

Some expenses need to be claimed over a longer period, including valuation fees, lender’s mortgage insurance and loan establishment fees, which can be claimed over a period of five years. The end of the financial year is also a good time to consider whether you should be claiming your landlord deductions on a regular basis rather than annually, especially if cash flow is tight. To do this you need to fill out a PAYG Witholding Variation Application, which you will find on the ATO site, and have less tax taken out of each pay packet. 

Get expert endorsement

Before forming a long-term relationship with a financial institution, it is important to look at all the options.

Take time to shop around for a financial partner that meets your needs and give serious consideration to “member-owned” organisations, such as building societies, credit unions and mutual banks.

A valuable part of your research would include looking for expert endorsement on financial products. Experts within the financial services industry, such as Canstar and Money magazine, offer independent ratings and awards that give an indication of the best value products in the market.

Member-owned organisations rank highly in these comparisons, as they often have higher interest rates on investments, lower interest rates on loans and fewer fees and charges. A little time spent researching and shopping around could save you thousands.

Posted by Pam Walkley - Money Magazine on 5th June, 2014 | Comments | Trackbacks
Tags:

Bookmark and Share

The trackback URL for this page is http://www.puzzlefinance.com.au/trackback?post=28885232


Trackbacks

There are no trackbacks for this post


Comments

There are no comments for this post


Post a Comment

HTML is not allowed in comments, http://... will be automatically linked.


Name (required):


Email Address (not displayed):


Comment (required):


To help prevent spam, please enter the word beam here:

Puzzle Finance Blog

About Puzzle Finance


Archives

September 2017
August 2017
July 2017
June 2017
May 2017
March 2017
February 2017
January 2017
December 2016
November 2016
October 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010

Tags

Purchase or Rent (1)
The Age (1)