Tax Time: Top four tips for property investors
Updated: Aug 11, 2020
If you have taken the plunge in investing in the Australian property market, use tax time as a reminder to get your ‘house in order’. De Kretser Law recently caught up with Daniel Hustwaite to pick his brain about what he thinks are the most important tips for property investors at tax time and how they can maximise their returns.
Daniel is the Principal of a mortgage brokerage company called Aqua Financial Services located in Eltham. The company’s team of brokers assist clients with lending options for their first home, an investment property, refinancing or renovating from over 40 different financial institutions.
Tip 1: Record keeping
Staying on top of your admin and record keeping throughout the year ensures that tax time is simple and stress-free. It is highly recommended to keep records of your expenses and receipts in one place in hard or soft copy.
Furthermore, it is important to keep a depreciation schedule as your accountant or real estate agent is not allowed to estimate fixtures and building costs. Property investors can use property depreciation as a tax break to offset the decline in value of their investment property from their taxable income. You can claim on the building’s structure and items to be considered to be permanently fixed to the property.
Be mindful that accountants can become really busy at the end of the financial year and there are penalties for submitting late tax returns. In order to avoid receiving a penalty, Daniel suggests preparing for the next financial year from the 1st July. It is never too early to start preparing for tax time.
Tip 2: Pay any capital expenses within the financial year for tax deductions
The second tip that Daniel swears by is staying on top of your capital costs within the financial year. These costs are associated with the purchase of the property. It is important to note that these costs are not deductable against the rent you receive, and they are added to the cost of the property. This means that when the property is sold, these costs can reduce your capital gains tax.
Below is a list of the most common capital expenses:
· Mortgage insurance
· Stamp duty
· Conveyancing costs
· Costs from obtaining a loan
· Legal fees
Tip 3: Have your property revalued
Another helpful tip is to use tax time to get your investment property revalued. You can speak to your real estate agent or broker to organise this for you. Getting your property revalued can potentially give you extra equity to reinvest or look less risky to banks for further loans.
Tip 4: Review your investment loan
The last tip Daniel suggests is to review your investment loan during tax time. It is beneficial to do this on a yearly basis and use the end of financial year as a friendly reminder. Reviewing your loan will ensure that you are not missing out on any discounts on your interest rates. Discounts can range between 0.8% to 1.25% so it is worthwhile putting this on your to-do list.
Aqua Financial Services does this for its clients automatically as part of their service offering. However, you can always approach your broker directly and arrange a review with them.
Bio: Daniel Hustwaite
Principal Daniel Hustwaite has extensive industry experience backed by a Diploma in Financial Services. Daniel has gained an exceptional reputation built on experience, integrity and unparalleled industry knowledge.
Daniel established Aqua Financial Services which holds its own Australian credit license, is a full member of the MFAA (Mortgage and Finance Association of Australia), is fully insured and continually delivers cost effective, perfectly matched solutions to its many satisfied clients.