Property investing can be a complicated business, especially if you’re new to it. So, as tax time approaches, we decided to put together some advice to help investors become a bit savvier when it comes to lodging tax returns. 

Tax time means crunch time for investors, and following these tips throughout the year and leading up to June 30 will really assist in getting you the best return on your taxes. As a property investor, you should: 

  1. Know your property
  2. Document everything
  3. Know what you can and can’t claim
  4. Time it right
  5. Keep capital gains in mind
  6. Think carefully before offering mates’ rates
  7. Make sure you don’t cheat! 

 

1. Know your property

Investors often think their property is worth far more than it really is. It makes sense that they have a soft spot for the property they purchased, but it can really deter tenants as the rent price is far too high. 

Combat this mindset by being brutally honest with yourself about where your property sits in the local market. Think about what renters will actually be willing to pay and enter into reasonable negotiations with potential tenants if necessary. You can also use Avnu’s Property Report to get a realistic price expectation for rent.

Involving a property manager can also be useful at deciding the rental price for a property. They have a great perspective on what renters want in the market at the moment and how much they want to spend. 

2. Document everything 

The golden rule of the ATO is that no receipt means no deduction. Having a property manager can really relieve the pressure of keeping track of all expenses. They will most likely keep track of all incomings and outgoings of your property, and you will receive a report of all transactions at the end of the month. This is where property managers can really make a difference for investors, ensuring the rental experience is smooth. 

If having a property manager isn’t an option for you, make sure to have a robust filing system. Store any receipts for expenses and profits to make the most of your tax return and ensure you abide by the laws. 

3. Know what you can and can’t claim 

The rules are always changing when it comes to items you can or can’t claim on your investment property. The best way to know what is deductible is to talk to an accountant, preferably a property-specific accountant, who is up to date with the latest legislation. Doing this annually will ensure that you’re making the most of your investment. 

Keep up to date with government policies that could be beneficial to you at tax time, or ones all year round such as the First Home Loan Deposit Scheme.

4. Time it right 

Think carefully about which transactions you make in one financial year. For example, if your tenants are wanting to pay you rent in advance, perhaps ask them to postpone it to July 1. Otherwise, your income might be pushed into the next tax bracket and you will get less deductions on your investment. 

5. Keep capital gains in mind

If you’re a seasoned investor, capital gains are probably front of mind, but newer investors might think less about this. Capital gains and losses are your net profit or loss (respectively) from your investment property. These are then pegged against your income to figure out how you will be taxed by the government. By keeping these stats in mind with every transaction that you make, you can really benefit your tax position by the end of the financial year. 

6. Think carefully before offering mates’ rates

Helping out a friend is always a nice thing to do – especially when offering them cheaper or free rent. However, if you offer cheaper rates or none at all, it means you won’t be able to claim as much tax back. It could also put a discrepancy in your books if you do it incorrectly, so make sure you document any reduced rates.

7. Make sure you don’t cheat

Cheating the system means you’ll be fined and put on the ATO’s black list. Following the tips above will make sure you reap enough rewards at tax time anyway! 

As you’d know, property investing is no walk in the park, but it’s incredibly rewarding and efficient when you have the right tactics in place. Get in touch with your local Avnu office to find out how best to manage properties and how to start investing. 

DISCLAIMER – The information provided is for guidance and informational purposes only and does not replace independent business, legal and financial advice which we strongly recommend. Whilst the information is considered true and correct at the date of publication, changes in circumstances after the time of publication may impact the accuracy of the information provided. LJ Hooker Avnu will not accept responsibility or liability for any reliance on the blog information, including but not limited to, the accuracy, currency or completeness of any information or links.

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