Tax time can be stressful or exciting time, depending on your situation. But at the end of the day, most of us are trying to do the same thing: increase our tax returns.
Perhaps you belong to a subset of people who like to pay more in tax. Perhaps you have money to give, or you think that the government does a great job of spending it.
Thank you; you guys are awesome. But this advice is not for you!
This advice is for landlords looking to maximise their tax return. So, here are our top dos and don’ts if you want to save as much as possible this EOFY.
👉 DOFigure out whether your property is actually making you money
Is your property positively geared? Make sure you’re taking all of your running costs into account when you’re trying to figure this out.
Here’s a checklist:
- Loan Interest
This is the biggest deduction you can make. Remember:
Total interest expense x (🏠 Investment property loan amount ÷ 💸 Total loan amount) = ☑️ Tax-deductible interest.
This page helps you to calculate how much your property may have depreciated. When calculating depreciation, remember to consider all fixtures and fittings, including carpets, cupboards, aircon, ovens, and showers, for example. You may want to talk to a quantity surveyor about depreciation. Quantity surveyor fees are also tax-deductible. Woo hoo!
- ALL Rental Costs
Advertising Costs • Rental Agent Fees • Legal Expenses • Council Rates • Utilities • Property Insurance • Repairs & Maintenance • Pest Control • Land Tax • Strata / Body Corporate Fees • Cleaning & Gardening Costs • Stationery, Phone & Internet Costs • Bank Charges • Accountant Costs & Tax Advice
Otherwise, you could end up paying a lot of unnecessary tax on your rental yield.
Remember that it’s about minimising taxable income, not your income altogether
It just doesn’t make sense to earn less income than you have to in order to pay less tax. That’s a lose-lose situation for you and the government.
Of course, there’s always a winner, and in this case, it’s your rental agent.
If they’re taking 6 - 8% (or even more) of your rental yield, it makes sense to consider something like Instarent in order to maximise your rental yield going forward.
Consider your plans for the future
You’ve gotta ask yourself one question: How long are you going to be renting this out?
If you’re looking at selling in the near future, just remember that pretty shortly, you’re going to have to pay capital gains tax on any money that you’ve made.
So make sure you’ve got some money in the kitty. 🐱
Be stingy when it comes to accountants
In our experience, these people are actually worth investing in (unlike rental agents).
Unless you’re super savvy when it comes to accounting, it’s probably worth talking to someone who has expert knowledge in the field and can help you make wise decisions concerning your property in the short and long term.
Plus, the fact that accounting fees are tax-deductible means you have more of an incentive to have an accountant help you find more ways to maximise your tax return.
Throw out your receipts
If you hate paper receipts, you can use the Instarent app and/or the free myDeductions tool to keep track of your costs. It allows you to keep photo copies of your receipts in one place, which is super important when it comes to tax time.