Maximising your investment property tax deductions will unquestionably boost your tax return.
Yet, many investors overlook expense claims because they are not equipped with the information presented by the ATO (Australian Tax Office).
Recognizing the full potential of all the available tax breaks could be the significant difference between having a positive cash flow and having a deficit to make up every month.
Let’s take a look at some of the valuable tax tips that will arm you to maximize your investment property tax deductions.
1. Claim Borrowing Expenses
Analyse the borrowing expenses you are paying on your investment property, as the following are some sections where you can claim deductions:
- Mortgage stamp duty
- Loan establishment fees
- Mortgage insurance
- Broker fees
- Valuation fees needed for loan approval
- Title search fees charged by the lender
- Legal costs and fees when preparing and filing loan documents
2. Know What You Can Claim
A property investor may also claim a substantial amount in depreciation deductions.
Property investors can usually claim tax deductions for:
- Insurance costs
- Property management fees and the interest incurred on home loan
- Land taxes
- Council and water rates
3. Prepay Investment Property Expenses
Prepaying the twelve months of interest on your fixed-rate mortgage enabling you to claim it as a write-off in your yearly tax return.
If the property is available for rent or was rented, you can claim a tax deduction on depreciating assets.
4. Set Up the PAYG (Pay As You Go)
When property investors set up a PAYG withholding variation, they do not have to wait to receive lump sum payment at the end of the financial year. Instead, they can receive expense deductions at regular intervals throughout the year.
Expenses claim this way include maintenance and repairs, capital works, equipment and plan depreciation.
Your employer can adjust the amount of tax you pay and your income to offset any possible tax liabilities.
5. Understand Capital Gain Tax
Capital gain is the difference between the amount you paid for the property and the amount at which you sold it. It is added to your assessable income and taxed at a marginal rate.
However, if you held your investment property for more than a year as an Australian citizen, you can qualify for a 50 per cent rebate on your net capital gain. This lowers your assessable income and hence, the amount of tax you will pay.
6. Engage A Specialist
Investors can consult a property tax specialist to discuss the investment property’s depreciation potential. They can help you maximize your return by outlining the deductions investors are eligible to claim.
We reached out to Rick Nieuwenhoven, Chief Executive Officer at the Nieuvision Group & Professionals Modbury, to know What’s The Best Way To Manage Tax As A Property Investor?
Well, here we try to do as much of it as possible for you. However, a little bit of organizational skill doesn’t hurt. We have implemented some new software recently.
Reach out to us, and we will talk to you about it. This software will help you upload your documents and retrieve them, and it will keep it all in one place outside of that. I would suggest that you look at our Variation Service, which couples in with the tax and helps you with the cash flow management. We also have a checklist available for you.
It should be available on our website, so if you want to look at all the available claims, download the checklist, and you can see it there also.
Lets Connect Over No-Obligation Phone Chat
We’ve helped many people with all the tax return opportunities available through investment property, and would be happy to help you too, just submit an enquiry online by clicking on the Contact Us button or call me directly on 0435 856 649 for a quick chat.