Choosing a good property tax accountant can really help improve your rental property investment return. It makes sense to get tax advice before you buy because there are many factors that can affect your annual cash flows and capital gains tax liability when selling. It is easy to be tempted to do-it-yourself to save a few dollars in advice fees, but there are many complex rules surrounding property taxation and debt deductions that could cost you thousands if audited by the Australian Taxation Office, not to mention increased taxes due to less than optimal structuring.
Taxology Accountants can help you structure your rental property investment to optimise your investment return. Contact us to arrange an appointment to discuss how we can help you with your property investment.
Here are a few tips to help your get the best tax deduction from your Rental Property investment:
Prepare before buying your rental property
Before you even begin looking for an investment property, it makes good sense to get advice as to what sort of investment best suits your personal situation.
- Should you buy an old house or a new apartment?
- Should you build your own investment property from scratch?
- Should you buy a cheaper property or a more expensive one?
- Who should own the investment property?
Depending on your income, family situation, age and many other factors, the effect of taxes, interest, inflation, expenses and time can transform what may seem like a fail-proof investment into a dud. However, proper planning may help mitigate such risks and assist you with making better investment decisions.
The first step in the process is to consider your objectives.
- What are you hoping to achieve by purchasing an investment property?
- How long do you intend to hold the investment for?
- What are your cash flow expectations?
- How do you intend to realise the investment?
Once you have decided on what your objectives and expectations are, gather details about your personal situation and make an appointment to see an accountant. We would be more than pleased to provide you with advice about how property types and ownership options will affect your taxation.
Keep good records
This is arguably one of the most important factors with regard to matters of taxation. The key here is simplicity. Simple, clear and easy to follow records make it easy for your accountant to prepare your tax return, therefore saving you money. Most residential property managers have easy to read monthly and annual reports that are easy for us to follow, but if you are managing your own property, talk to us before investing in an off-the-shelf software package, as unravelling inaccurate computerised records may end up costing you more at tax time.
Here’s a basic guideline on what sort of records you should keep:
- Purchase Contracts
- Settlement Statements
- Finance Contracts
- Plant, Equipment & Building Works valuations/schedules
- Information about pre-rental improvements/renovations
- Property Managers Reports
- Insurance, Rates, Taxes, Utilities, & Other Expenses
- Finance Statements
- Information regarding repairs/improvements
- Information regarding replacements/upgrades to Plant/Equipment/Building Works
- Insurance claims
- Your time/expenses/travel with regard to maintaining the investment
- And more….
Changes to usage
Changes to the way you use your property may affect your taxes in the future. A common example of this is where people move in to a rental property and begin using it as their main residence. Changes to your investment property usage status may have consequences with regard to Income Tax, GST, and/or Capital Gains Tax. At minimum, there are likely to be some dates that must be noted in your tax records.
It always makes good sense to pay a small amount to get advice prior making an important investment decision rather than dealing with the consequences of making an uninformed decision that could potentially cost you many times more. Here at taxology, we would be more than pleased to advise you on the most advantaged way to proceed with changes to the status of your investments.
The information detailed above is only intended as a general overview and may not be relevant to your particular circumstances. Please contact us for specific advice with regard to your personal situation.