20 Jun Tax Deductions – What to Consider BEFORE 30 June
Property-related expenses paid for in the next couple of weeks allows you to reclaim a fair chunk of your money back within the next couple of months, rather waiting more than a year because you left the spending until after June 30.
Below we’ve listed a range of recommendations that landlords should consider spending money on before June 30 escapes us!
Repair that dodgy door, fix a broken fence, or add a fresh coat of paint; they’re the easiest and quickest tax deductions available. We recommend either you or your property manager organise this all with your local tradie as soon as possible.
However, please note that the ATO is very clear with their definitions of tax-deductible work. For example, expenses must relate to addressing wear and tear or other damage. Conversely, capital improvements such as big renovations must be written off over several years.
If you’re currently not using a property manager to manage your property, but would like someone to take the work off your hands, please get in touch with us. Alternatively, please see what our property management wing has to offer on our website.
Depending on your tax situation and financial resources, it’s possible to prepay one-year’s worth of investment loan interest in advance to maximise your tax deductions. This can be on top of all the interest you’ve paid in the current financial year, so it may be a handy way to offset capital gains elsewhere.
However, remember that unless you keep prepaying interest in future years, you’ll be stuck with a year with no interest deduction to offset your rental income.
Terri Scheer Insurance executive manager Carolyn Parrella says you cannot claim a whole year of interest if you personally used the property for part of the year.
“Landlords may be unaware that interest can only be claimed when the property is available for rent,” she says.
If you’re going to prepay your property’s insurance policy, now is the time to do it.
“Property investors can usually claim their landlord insurance premium as a tax deduction; it’s something often overlooked,” Ms Parrella says.
It’s also worth checking your insurance now too, she says. “Some landlord insurance policies provide cover for professional fees incurred from an ATO tax audit relating to investment properties. A standard home and contents insurance policy won’t cover landlords for the specific risks associated with property investing.”
The Final Say…
Be smart with your purchases. Please keep in mind that the marginal tax rate usually falls between 34.5 and 47 cents in the dollar, meaning any unwise spending could actually be greater than the money you’d recoup from the taxman. On the contrary though, timing your spending perfectly can deliver you a tasty financial treat in July or August.
If you ever have doubts on what expenses you should make before June 30, speak to your investment property expert.
Originally Published by Anthony Keane of The Advertiser on the website www.adelaidenow.com.au