Tax tips for property owners and investors
Lodge your individual tax return the right way
Do you own an investment property? Maybe two or three?
When you are getting ready to lodge your individual tax return, you will probably want to know how to declare the investment and the income, and how to maximise your efforts?
If you own an investment property – or multiple properties – chances are you’ve worked hard to achieve this financial reward.
Property investment can be hard work, but it also comes with plenty of tax breaks – and we can help you understand how to manage this.
Let us guide you with how to claim your rental property income and deductions to maximise your tax return.
Breakdown of property investment tax breaks
If you use your property to earn income at any time, you will have tax obligations and entitlements.
What can property investors claim?
There are a multitude of items that property investors can claim in tax.
The ATO has a mind-boggling long list of tax-deductible items, including but in no way limited to:
- Advertising costs and management fees
- Bank charges
- Body corporate fees and charges
- Electricity, gas, council, and water rates
- Gardening and lawn mowing
- Insurance (building, contents, public liability)
- Interest on loans
- Land tax, stamp duty
- Legal expenses (excluding acquisition costs and borrowing costs)
- Property agent fees and commissions
- Quantity surveyor’s fees
- Repairs, maintenance, and cleaning
- Tax-related expenses
Our team at MMA know all the categories you can claim – yep ALL OF THEM! So, speak to us before lodging your individual tax return.
8 key tax-time tips for property investors
1. Account for negative gearing
Negative gearing is one of the most popular tax deductions that you can claim on your investment property. Negative gearing basically accounts for when the total rental income from the property does not cover the total costs involved with owning the property such as mortgage repayments, maintenance costs and strata fees. This shortfall – or cost to you – can be looked at during your tax return.
2. Calculate the depreciation factor
Depreciation is also another big tax deduction. This tax break allows investors to offset the investment property’s decline in value from their taxable income. We recommend getting a depreciation schedule completed – ask us for more information.
3. Consider any capital gains tax
Whether you plan to hold onto your property for the long term is up to you, however, if you have owned the investment property for 12 months or longer you can reduce any capital gains tax (CGT).
However, if your investment property used to be your principal place of residence, then this property can be treated as your main residence for up to six years after you stopped living there, providing you don’t have any other main residence. This means that you are exempt from CGT.
4. Interest only loans may offset your overall taxable income
While having an interest-only loan on your investment property may help due to the interest always remaining high due to the principal never being reduced, there might be other impacts that are not so favourable, so we recommend that you chat to your professional advisor about the benefits of an interest only loan and whether this is an appropriate option for you.
5. Consider when you buy appliances
To get the most out of your tax return you can plan when you buy new appliances such as a new oven. For example, if you buy these in June, then you only claim one month of depreciation. It’s therefore best to buy these items, especially any big items you know that need replacing during the early part of the financial year.
6. Organise and keep your receipts
Make sure you keep all receipts and get into good habits of filing these away neatly. The ATO audits thousands of taxpayers every year to ensure their claims are genuine. If you have no receipt, then there is no deduction, so it’s best that you have proof for everything so you can justify your claim. You should also keep receipts for a minimum of five years.
7. Use an Accountant
Having a good accountant is also a great move as they know exactly what you can and cannot claim, plus their fees are also tax deductible. If you own more than one investment property, sorting out tax can get quite confusing so this will certainly make your life much easier and less stressful.
8. Keep up to date with changes
Well, if you follow step 7 above, this will all be taken care of!
The ATO regularly makes large-scale changes to its legislation, and at MMA, we are always up to date on the latest permissible tax deductions.
Disclaimer: The information provided is intended to be general in nature and is not personal financial advice. It does not take into account your objectives, financial situation or needs. Before acting on any information in relation to your investment property/s, you should consider the appropriateness of the information provided and seek independent financial advice.
Ready to roll with your 2021-2022 SOLE TRADER tax return?
To find out more about how much tax you could be saving by owning an investment property, why not lodge your individual tax return through MMA via our simple Online Tax Shop.
Here are your two options:
Complete our easy online form and get one of our local accountants to complete your tax return in 3 business days* (pending all information being supplied and queries responded to)
Book an online appointment with one of our local accountants to get your tax done from the comfort of your home.
We can help you – simply contact us today
At MMA, we specialise in helping sole traders and individuals across Tweed Heads, Northern NSW and beyond to maximise their tax returns.
Are you ready to get your 2022 lodged by a local Murwillumbah accountant to maximise your tax return and get peace of mind knowing you’re compliant with the ATO?
Simply book your session below.