It’s been busy at the office; the calendar is full of appointments with our individual clients who use our services for tax return preparation. It’s great to catch up with them all and find out what’s been going on in the last year – job changes, new babies, purchase of investment properties, retirement and for one client; all of the above! Changes in circumstances often effect your tax position so it’s important to communicate with your advisors to keep us in the loop with what’s going on. This helps us to advise you properly before the fact so that in the long run, you can relax knowing that your affairs are in order.
Here on the Gold Coast, the real estate market is either wonderful or woeful depending on whether you are a buyer or a seller. It’s no secret property prices aren’t what they used to be so it’s a great time for investors with available funds to be entering the market. From a tax viewpoint, owning an investment property can be very advantageous if you know what you can and can’t claim and you’re smart with the way you manage your investment.
My top tips for maximising your tax refund are:
- Get a Quantity Surveyor report. This report will outline the non cashflow deductions you can claim and this helps increase your refund. The report puts a value on items such as flooring and inbuilt appliances which allows for depreciation and building write off claims to be made in your return. The cost of the report is also tax deductible.
- Be careful with your loan. The interest on the funds used to purchase your property are deductible provided that you don’t taint the loan. This means not drawing any surplus funds from the loan for private purposes even if you have been paying extra off. It also means not combining the investment loan with your home loan or any other non investment loan. Once the loan is tainted, the interest is not only difficult to calculate but you lose some of the benefit of the deduction. This is the most common mistake that I see.
- Where the property is negatively geared and costing you to hold during the year with some reimbursement coming from your tax refund, consider getting an income variation prepared by your accountant. An income variation serves the purpose of estimating the tax refund you expect at the end of the year and instead of waiting until tax time to receive it, providing you surplus cash in your usual pay cycle. This can assist with your cash flow during the year, especially for high cost properties.
- If you’ve purchased the property during the year, don’t forget to claim the cost of the settlement adjustments. It’s very common to end up reimbursing the vendor costs such as rates and water and these are deductible to you.
- If you’ve taken finance for the property during the year, be sure to keep track of the fees charged by the bank. Generally these can be claimed over a 5 year period and banks are notorious for charging these to other personal accounts and the deduction can be lost.
- Don’t forget about the little things like travel and telephone expenses. If you’ve been inspect the property, collect rent, do some maintenance – these trips can be claimed. Telephone expenses for property related calls are also deductible.
If you’d like any further information about any of these details please give me a call at the office on 07 5576 0011 or email me at firstname.lastname@example.org. I’ve got a particular interest in property and am happy to answer any questions no matter how silly they may seem. In fact, those questions are my favourite!