It’s the end of the financial year. That time of year when you start the process of getting your records in order and gathering receipts before heading to the accountant. Here are some things to consider in order to help you capitalise on tax concessions and other opportunities this financial year.
1. Ensure all maintenance jobs are done before July 1st so they can be claimed as deductions for the 17/18 financial year (FY). Keep in mind that repairs can only be claimed in the year they were completed. In contrast, larger scale projects may be considered as improvements and be depreciated over the useful life of the property.
The Australian Tax Office (ATO) have produced a useful resource about what you can and can’t claim in the area.
2. Be aware that the ATO has also removed depreciation deductions on second-hand properties purchased since May the 9th 2017. In essence, the value of fixture style assets that were in the property at the time of purchase can no longer be used as an offset. This does not apply to new builds. Any investors who have purchased new builds should ensure they have hired a quantity surveyor to prepare a depreciation schedule.
3. If you can, delay any property sales until July as this could significantly affect your tax bill this financial year. Delaying until the start of the new financial year will mean that you can postpone any capital gains tax payments for twelve months.
4. For property investors who have a fixed loan, try to pay some or all of next FY’s interest bill on property borrowings this financial year. That way you can bring forward the tax deduction into this year. This is especially helpful if you are expecting a high tax bill this year compared to next. Be aware that you can only prepay interest on fixed loan borrowings not variable.
5. It’s always a good idea for multiple property owners to review your property portfolios. Remember that if you have carried forward any losses from previous years you will be able to offset these against any capital gains.
Also note that as of 1st of July 2017, individuals with residential investment properties will not be able to claim travel related expenses as deductions.
6. Investors can receive multiple benefits by contributing up to $25,000 before tax to their superannuation fund. Not only are you increasing the value of your superannuation fund you also can enjoy the added benefit of an income tax deduction. Simply make a before-tax contribution to your nominated super fund and you will be able to claim up to $25,000 as a tax deduction and potentially reduce your taxable income. The added bonus is that superannuation is only taxed at 15% compared to the margin rate, which can be as high as 47%. Be aware there that individual’s whose income derived from certain sources is over $250,000 may have to pay an additional 15% in concessional contributions. If your spouse earned below $45,000 this FY before tax and you contribute to their superannuation fund, then you may be able to claim a $540 tax offset.
7. Similar to prepaid interest on loans for property borrowings, when you take out a loan to make any investment that generates tax assessable income, you can generally claim a deduction for the interest on the money borrowed. It’s a good idea to prepay that interest for the next twelve months if you are able. This ensures you interest rate will be “locked in” for the next financial year and potentially assist with obtaining a greater tax deduction this financial year.
Hopefully, you’ve identified some incremental opportunities to assist you this financial year. Importantly, anyone who engages an accredited tax agent or account does not need to may payment on any tax bill for an additional six months. We look forward to seeing you shortly and if you have any questions in the interim, please don’t hesitate to call on (07) 3366 1891.