As a landlord, there’s no wrong time for you to start thinking about preparing for the lodgements of your tax returns.
We advise that you start gathering relevant paperwork around May. You should also check the residential rental properties area of the ATO website to see what you can claim for this past fiscal year.
It’s also a good idea to refer back to your last tax return so you don’t miss any claims.
If you have a property manager looking after your property, they will supply clients with their Income & Expenditure report to lodge with their tax return, usually in the first week of July. This report will cover all claimable costs and work the property manager has arranged for you.
Of course, this won’t be the complete picture. There are other expenses associated with a rental property that can be claimed, too. These will likely include professional services, such as legal and accounting advice, plus council rates and depreciation.
A comprehensive tax return can make a significant difference to your returns. It can be the difference between your property producing a negative or positive cash flow for the fiscal year. So, here are seven suggested actions we advise all of our landlords to do:
1. Speak to an accountant
Professional advice is advisable when you’re a property investor. And if you don’t have a depreciation schedule – it’s said 80% of landlords don’t – then get one as soon as you can. You can learn more about depreciation reports from our preferred quantity surveyors here.
2. Contact your property manager
This is a great opportunity to discuss the rental market, property values and any further information you need on understanding your Income & Expenditure report.
3. Consider small improvements now
If you can squeeze in any work requested by your tenant, then you will be able to claim the expense almost immediately if done before June 30.
4. Prepare paperwork
Gather all the receipts related to the running of your rental property. Get them in good order. It’s a great discipline as it provides you with insight into the financial performance of your investment and your accountant will need these. We advise to itemise all of these in a spreadsheet. It will make yours and the accounts job much easier, and faster.
5. Get familiar with the basic rules
Tax regulation changes every year, so it’s never a bad idea to know what you can claim. These include items such as:
- Interest on your loan
- Professional fees – legal, accounting and property management
- Maintenance costs/strata fees
- Depreciation – You can make claims only if you have a depreciation schedule created by a quantity surveyor.
6. Review insurances
This is a good time to check what you’re spending on policies for content, building and landlord insurance. You can claim insurance costs for the last 12 months, and it never hurts to see if there’s a better deal out there and to double-check you’ve got appropriate coverage. You can learn more about landlords insurance here. This is our preferred insurance provider and they are Australia’s leading landlord insurance specialist.
7. Sell later
If you’re on the brink of selling your property, it’s a good idea to delay the transaction until July. That way, you avoid being charged capital gains tax in this fiscal year and can it settle your tax in the next financial year.
This information is general only and does not constitute professional advice. You should always seek professional advice concerning your particular circumstances before acting.
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