- Maximise tax benefits and transform negatively geared properties
- Use PAYG tax variation for enhanced cash flow and management
- Understand the difference between repairs and improvements, and plan for maintenance
The rising interest rate environment is making life challenging for property investors, however, there are a number of things you can do ahead of the end of the financial year to maximise your financial benefits according to an expert.
Leading buyers agent and founder of Aus Property Professionals, Lloyd Edge, said that with interest rates still on the rise, landlords must be proactive in optimising their tax returns and improving their financial outcomes.
“By claiming everything they are entitled to, including maximising depreciation and all costs, investors have the potential to transform a negatively geared property into one that returns a positively geared outcome after tax,” said Edge.
“Many investors overlook these benefits, which can make a significant difference in their overall financial position.
“Landlords need to seek professional advice and stay informed to make the most out of their property investments.”
PAYG tax variation
Edge said that investors need to start by consulting their accountants regarding the eligibility for a pay-as-you-go (PAYG) tax variation for their investment properties.
“A PAYG tax variation allows investors to adjust their tax withholdings throughout the year, based on their estimated taxable income from their investment properties,” said Edge.
“Implementing a PAYG tax variation can enhance cash flow throughout the year, offering protection against interest rate increases and facilitating better financial management.
“By distributing the tax benefits evenly throughout the year, landlords can improve their overall financial position.”
He also said it is normally worthwhile hiring a quantity surveyor to create depreciation schedules.
“Engaging the services of qualified quantity surveyors is a crucial step in accurately assessing and claiming depreciation on investment properties.”
“These professionals specialise in identifying depreciable assets and determining their values.
“By leveraging their expertise, landlords can maximise their tax deductions and generate substantial savings.”
He said depreciation schedules provided by quantity surveyors are invaluable in claiming deductions over the life of the property and its assets, resulting in significant financial benefits for investors.
Know your deductions
According to Edge, property inventors must also understand tax deductions.
“To optimise tax returns, property investors should familiarise themselves with the various tax deductions available to them.”
“Deductible expenses can include property management fees, repairs and maintenance, insurance premiums, advertising costs, and more.
“By having a comprehensive understanding of these deductions, landlords can strategically structure their expenses to maximise their tax benefits and improve their financial outcomes.”
Lloyd Edge, Aus Property Professionals
He said staying informed about changes in tax laws and seeking professional advice from accountants specialising in property investing can help investors navigate this complex landscape.
Plan ahead
Edge said investors must also understand the difference between a ‘repair’ and an ‘improvement’:
“Distinguishing between repairs and improvements is crucial for accurate accounting and tax compliance.”
“Repairs are considered expenses incurred to restore a property to its original condition, such as fixing a broken window or repairing plumbing issues.
“These repairs are generally tax-deductible in the year they occur.
“On the other hand, improvements enhance the value or extend the life of a property and may need to be depreciated over time.
“It is important for property investors to work closely with their accountants to properly classify expenses and ensure compliance with tax regulations.
He said it is also worth planning for future maintenance ahead of time.
“By addressing potential issues in advance, landlords can minimise costs and maintain the value of their investments.”
“It is prudent to allocate a portion of the tax return towards a dedicated fund for future repairs.
“This approach allows investors to be prepared for unexpected maintenance expenses, ensuring the long-term viability and profitability of their properties.
“By setting aside funds for future maintenance, landlords can mitigate financial strain and preserve the condition and value of their property.”
According to Edge, investors should always seek out professional advice.
“Consulting with property experts, accountants and tax advisors specialised in property investing is highly recommended.”
“These professionals possess in-depth knowledge and experience in navigating the complexities of property investment taxation.
“They can provide invaluable guidance tailored to individual investment strategies, helping landlords optimise their financial outcomes and stay compliant with tax laws.
“A tax accountant specialising in property investment can assist in structuring finances, identifying tax deductions, and exploring tax planning opportunities.”
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