8 Ways to Slash Your Property Tax Bill Before the End of Financial Year

The end of financial year can bring a bit of stress to new investors, after all simply mistakes can be costly and trusting the wrong person can leave you with a bad taste in your mouth. With a few years of experience and the right guidance, this stress will become a thing of the past and tax time will simply be an opportunity to make sure you are maximising your deductions.

  1. Know what you can claim as a tax deduction

Advertising for tenants

Bank charges

Body corporate fees and charges

Cleaning

Council rates

Annual power guarantee fees for electricity and gas

Gardening and lawn mowing

In-house audio and video service charges

Building, contents and public liability Insurance

Interest on loans

Land tax

Preparation, registration and stamp duty expenses for lease documents

Legal expenses (excluding acquisition costs and borrowing costs)

Mortgage discharge expenses

Pest control

Property agent’s fees and commissions (including prior to the property being available to rent)

Expenses incurred in attending property investment seminars to improve the performance of a current income-producing property

Quantity surveyor’s fees

Costs incurred in relocating tenants into temporary accommodation if the property is unfit to occupy for a period of time

Repairs and maintenance

Cost of a defective building works report in connection to repairs and maintenance conducted

Secretarial and bookkeeping fees

Security patrol fees

Servicing costs, for example, servicing a water heater

Stationery and postage

Telephone calls and rental

Tax-related expenses

Water charges

What property investors can claim over a number of years

Amounts for decline in value of depreciating assets

Capital works deductions

Loan establishment fees

Title search fees charged by your lender

Costs for preparing and filing mortgage documents

Mortgage broker fees

Stamp duty charged on the mortgage

Fees for a valuation required for loan approval

Lender’s mortgage insurance billed to the borrower

What property investors can’t claim as a tax deduction

Acquisition and disposal costs (although these may be added to your cost base when selling)

Expenses not actually incurred by you, such as water or electricity usage charges borne by your tenants

Expenses that are not related to the rental of a property, such as:

Expenses connected to your own use of a holiday home that you rent out for part of the year

Costs of maintaining a non-income producing property used as collateral for the investment loan

Expenses incurred in relocating assets between rental properties prior to renting

Travel expenses

to rental seminars about helping you find a rental property to invest in

to inspect a property before you buy it

Travel expenses from the July 1, 2017 onwards

to inspect a property you own

for maintenance of a property

for rent collection

2. Pre-pay interest and expenses

This strategy is particularly useful when an investor’s annual income is higher than normal, pushing them into the next tax bracket. For borrowers with fixed-rate loans, paying interest now for the next 12 months allows investors to claim the deduction this financial year. Expenses such as gardening or agents’ fees can also be prepaid, and service providers may even offer a discount.

3. Hire a quantity surveyor

Depreciation is one of the most valuable deductions property owners can claim. Investors can deduct the amount that assets used to produce income have declined in value over that financial year. Estimating these declines is complex, so a quantity surveyor should be engaged to create a depreciation schedule.Depreciation is not claimed correctly by 70 or 80 percent of investors, so they’re leaving money on the table. Investors often expected accountants to take care of depreciation, or were put off by the cost, which is usually about $700.

4. Replace low-value items now

Whenever you replace a plant and equipment item, you get to claim depreciation against the new one. For anything worth less than $300 that needs replacement, replace it in June rather than July.
While depreciation for expensive items such as hot water systems is claimed over several years, a 100 percent deduction is available for items costing under $300 in the year the items are purchased.

5. Claim borrowing expenses
A lot of people forget to claim mortgage protection insurance that they might be taking out if they’re getting a larger mortgage.The costs to take out a loan, including establishment fees, mortgage stamp duty and mortgage broker fees can be also be claimed, although these deductions must be spread out over five years.

6. Ensure claims are still valid

A landlord is no longer able to claim travel deductions for inspecting, maintaining and collecting rent. Recent changes mean some notable deductions are no longer allowed, which CPA Australia head of policy could come as a shock to some investors.The fact that they’ve changed the travel rules indicates that the ATO and the government believe that travel claims were being abused. Additionally, investors can no longer claim depreciation on second-hand items, or previously used items in property purchased or turned into a rental after May 9, 2017, as this deduction now only applies to new items.

7. Find a good accountant

Most accountants should be able to give you the kind of advice you need to get your taxes right but it is worthwhile checking that they do have experience with rental properties and how many clients they have in that space. Ask them questions about your specific tax affairs and what advice they would be giving you

8. Don’t lie

The ATO is cracking down on dodgy deductions by property investors, and the punishment for rorting the system can far exceed any expected savings.The penalties can be up to double the tax avoided plus interest,

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