Property investors can minimise end of financial year panic and maximise tax benefits with a few easy steps.
Keep your receipts
This may sound simple, but it’s amazing how many of us don’t keep documentation of expenditure during the financial year. Your property manager will be able to provide you with annual income and expenditure reports, but in the event you pay for any supplies, fittings or maintenance yourself, be sure to document these expenses and keep the relevant paperwork.
If your investment property is interstate (or even a few hours away) you may be able to claim the costs of travelling to and from it for inspections, maintenance and so on. Document all trips and speak to your accountant about claiming them.
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Interest expenses incurred on borrowed funds that you have used to invest are tax deductible. This is determined solely by the purpose of the loan, so if you plan to use a loan for both investment and personal expenses, consider splitting it to maximise your tax benefit (and avoid surprises from the ATO).
Losses vs. gains
Capital losses and capital gains have a huge impact on your tax liability, but can be a trap for new investors. You will need the services of a qualified accountant to ensure you are adequately offsetting any capital gains. If you are planning to sell a property, be sure to notify your accountant, as the timing can have tax implications.
Establishing a trust can be extremely beneficial, not only from a tax perspective but also when it comes to asset protection, risk, estate planning and other legal issues. Investing a few thousand dollars in ensuring your trust is properly set up and administered will bring gains in the future.