One of the most common pieces of advice given to property investors is to never invest just to avoid tax. Tax reduction is one of those investment benefits which should represent the icing on the cake. This wisdom hold value, as governments are notorious for changing the tax rules when investors least expect it. As far as icing on the cake goes, reduced tax is a good one! Here are our tips for saving tax on your investment properties:
- Use a quantity surveyor to create a tax depreciation schedule. For properties owned before May 9th 2017, all depreciating asset deductions can still be claimed. Since that date, only deductions on brand new homes and assets can be claimed. This means there’s a significant advantage in buying new homes and attaining a high quality depreciation schedule.
- Remember to claim all your borrowing expenses which include: lender’s mortgage insurance, loan establishment fees, mortgage broker fees, valuation fees and stamp duty charged on the mortgage.
- Keep receipts for all property maintenance and use them to claim deductions. The ATO is particularly focused on checking for receipts these days, so it’s worth paying attention to.
- Pre-pay your interest if you believe your income will be in a lower tax bracket in the following financial year, as it increases the value of the tax deductions to you.
- And finally, find an excellent accountant who knows how to save you tax whilst remaining on the right side of the law. This is a benefit which is hard to quantify, but which could save you a considerable amount of tax over the long term.
Landen’s Director Jim Dionysatos believes reducing tax is worth focusing upon: ‘Our most successful investment property clients are generally utilising the attractive tax breaks available to them, and for good reason. These simple tax management strategies often make a significant difference to the overall return their properties generate. The difference to cashflow could be enough to fund an additional investment!’