Five things property investors can do to get more back at tax time


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There are five easy things property investors can do in June that can add thousands to their tax return come July.

These simple tasks could be undertaken in the next few weeks for an almost immediate payback.

Many property investors believe that come June, it's too late to implement actions that will boost their tax position - but they're dead wrong.

properyt investor bigger tax refund

By making these moves now, you could see thousands of extra dollars come back to you from the ATO in just weeks.

While national property values have risen strongly in recent months, there's been precious little support from authorities for Aussie investors over the past year.

The Federal Budget, delivered pretty much no relief for investors - so they need to take action themselves in order to boost their benefits before June 30.

1. Easy repairs and maintenance

It's time to tackle all the minor maintenance for your investment property that's been building up during the year.

There are often many small repair items needed on an investment, but because they don't materially affect its appeal or rentability, owners are inclined to put off attending to them.

For example, it could be just minor fixes, paint touch-ups or some garden maintenance.

Now is the time to act, because any costs you incur in June are 100% tax-deductible in July. Miss this window of opportunity and you'll be waiting another year to get the benefit.

2. Pay your loan interest in advance

For those with the financial means - or perhaps a sudden windfall - the ability to pay your investment loan interest in advance can be an extremely cost-effective way to get a sterling tax return.

Depending on your loan arrangements, paying a huge lump of interest in June can provide a substantial write-off come July.

It's a strategy few investors realise is open to them each financial year.

Here's my other pro tip - If you've redrawn equity from your investment property's loan, make certain those funds have been used for investment purposes, or the ATO will take you to task.

3. Upgrade your property

More substantial upgrades to your investment provide excellent tax advantages, and some can be done quickly to allow you a benefit this year.

Making any addition to your investment will result in some great deductions, but not all are created equal.

For example, adding new tiles will only get you 2.5% of the cost as a deduction each financial year, so doing that in June means you only get one month's worth of that amount.

There are smarter ways for investors to bring upgrade deductions forward.

Install items worth $300 or less. This could include kitchen appliances, window blinds and curtains, air conditioners and other generally non-structural assets. As an example, installing a $280 ceiling fan means the amount is deducted straight away.

Also choosing the right fixture will bring immediate relief. For example, if you install tiles worth $2500, you'll get $62.50 times the percentage of days left in that financial year as a deduction. But change the tiles to carpet and it's 10 times that amount as a 25% deduction.

Finally - consider installing equipment priced under $1000 as some deduction rules make this type of outlay late in the financial year extremely lucrative in terms of tax.

4. Call your property manager and accountant

Not enough people use June as an opportunity to check in with their professional advisors.

Property managers keep a running tally of deductible repairs and upgrades as part of their annual rental statement, and this will be required reading for your accountant.

In addition, your property manager will provide advice on works they can co-ordinate in the coming weeks that will help improve your deductions by year's end.

The other great thing about accountants and property managers is that their fees are also tax-deductible.

Don't forget to include those professional costs as part of your tax return this year.

5. Get a depreciation schedule

Depreciation schedules prepared by suitably qualified professionals assign hugely advantageous tax-deductible depreciation to your property's fixtures, fittings and finishes.

If you haven't already organised for a depreciation schedule, then get onto it today.

It is extraordinary the number of investors who miss out on literally thousands of dollars in benefit simply because they don't get a depreciation schedule.

These reports cost a few hundred dollars, so the return on cost is exceptional.

A recent MCG study revealed the average loss in deductions due to investors simply taking too long to arrange for a depreciation schedule was a staggering $20,000.

One investor waited almost 18 years to do a schedule and lost $41,000 in tax breaks as a result.

If you extrapolate our findings across the nation's total investor population, Aussie landlords are potentially short $2.886 billion on their claimable losses.

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Mike Mortlock is the managing director of MCG Quantity Surveyors. He holds a Bachelor's of Construction Management from the University of Newcastle and is a member of the Australian Institute of Quantity Surveyors. Mike is the host of the Geared For Growth podcast and is a regular media commentator addressing all facets of the Australian property market.
Eileen Williams
June 18, 2021 3.20pm

Point 5, above re Depreciation Schedule. What I think also needs to be pointed out is that if you have had a depreciation schedule, come time to sell all the 'tax benefit' gained by having the schedule for all the years of the investment property held, has to be added back to the profit made on the sale, and increases the cost of capital gains tax. I'm not sure those who take out a depreciation schedule realise this is the situation come sale time, or whether it is clearly made known to them.

Martin Dantas
June 18, 2021 4.50pm

Technically yes depreciation and capital works deductions need to be subtracted from the cost base. The there is still a benefit to getting the schedule because the amounts claimed as deductions are taken at marginal rates, but the capital gain is at 50% of marginal rates (assuming it's available to you).

Always get tax advice from an accountant!