Effective planning and preparation is critical for all taxpayers as the end of financial year approaches. The good news is that your tax professional is here to support you so you don’t have to do all of the heavy lifting yourself. This is the perfect time of the year to seek advice from your accountant to maximise your tax savings for 2019-2020 and start planning fresh for next year.
Tax tips for property investors
COVID-19 has thrown businesses into chaos and the situation is not significantly different for property investors right now, but a quick review may help dampen the impact.
Land tax deferrals
Many state governments are allowing landlords to temporarily offset losses by deferring land tax obligations (refer to your own state’s COVID-19 response to tenancy agreements). QLD and NSW will also be providing a discount of up to 25 percent on land tax in 2020 on the condition that savings are passed on to tenants through commensurate rent relief.
Prepaid expenses
Bring forward any maintenance expenditure that will need to be completed by 30 June. Ensure to distinguish between what the ATO considers a ‘repair’ and an ‘improvement’, as improvements are non-deductible.
Interest
Pre-pay interest on property investment loans if you have adequate cash flow in order to claim an immediate deduction. Investors may choose to pay interest in advance in order to simplify finances by making one prepayment of interest upfront or protect against possible interest rate rises over the 12 month period.
Short-term holdings
If you have renovated property with the view to sell it for profit in the short term, you may find yourself taxed as a ‘profit-making scheme’. This means you will not be able to take advantage of CGT concessions.
Personal expenses
Ensure that any claims or interest on borrowings for investments can be clearly separated from interest on borrowings of a personal nature.
Depreciation deductions
A depreciation schedule can be provided by a qualified quantity surveyor, outlining the tax deductions that are available and help to provide a significant return. The cost of having a depreciation schedule prepared is also tax-deductible.
Repairs at the time of purchase
Expenses for repairs to the property are generally deductible provided that they relate to wear and tear or other damage as a result of earning rental income. The cost of initial repairs at the time of purchase are not deductible.
We want to help you achieve the best result. If there is any additional assistance we can provide, or if you would like us to review your situation, please contact our office on 07 3103 8551.