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It might seem like just yesterday we were welcoming in 2022 and now it’s almost mid-year. With June 30 – the end of the financial year (EOFY) – just around the corner, now is the time to gather your receipts and maximise the incentives still available to property investors.
Unsure as to where to start? Whether this is your first time preparing your return or you’re familiar with the process, these steps can help you get organised and make the most of what is available to you.
Whether you’ve been diligent in record-keeping or not, a good place to start is by preparing and filing your receipts. If you’ve been organised throughout the year, this will be as simple as looking through the system you’ve used, such as an app, email folders or printed documents.
Otherwise, it’s worth spending the time locating and looking over your receipts in order to claim any deductions.
Thinking ahead, if you want to be better organised for the next EOFY, set up a system to keep you on track throughout the year – you can download the ATO app to log your expenses as you go.
If you have an investment property, you’ll be able to claim expenses such as council rates, loan expenses and costs related to advertising, accounting and alterations. Interest expenses for an investment property and related bank fees can also be claimed.
Keep in mind though that these claims only apply to the periods in which your property was tenanted or advertised, not for the entire time you’ve had the property.
Don’t forget to claim any costs related to the investment property’s repairs and maintenance (including services such as pest control or gardening). Your role as the landlord also enables you to claim expenses relating to the running of the property, which can include phone calls to the tenants or real estate agents and internet charges, but these must be portioned according to how often they were used for this purpose (rather than personal use).
You can also claim any depreciation related to the building itself, as well as its appliances (such as the dishwasher, heater/aircon units, etc), there are certain second-hand assets you can also claim depreciation deductions on.
Dates also come into it for other expenses you can claim. If your investment property was built after 16 September 1987, you can claim a depreciation deduction on the construction costs of 2.5% a year for a period of 40 years. The same applies to renovations that were done after 27 February 1992.
By prepaying your investment property interest, which you can do for up to 13 months, you could save more in the long run, reducing your interest payable.
You might also reduce your taxable income by prepaying your interest, as what would have been a tax deduction next year, could be claimed this financial year.
If you’ve sold your investment property and made a capital gain on the sale this financial year, this will be included in your taxable income. If you have owned your investment property for over 12 months, you may be eligible for the capital gains tax (CGT) discount of 50%.
Calculating your capital gains can be complicated, online tools can help, but it’s worth talking to an expert.
With rates changing, it’s also worthwhile reassessing if your current loan works for you. Perhaps you would be better off with a variable rather than a fixed-rate loan, or vice versa.
End of financial year is a time when many people start looking deeper into their finances and considering whether they need to make changes to their loan. This can then set you up to be in a better position for this time next year.
The last thing you want is to be fined for a late return or scrambling to play catch up, so make a note of the ATO’s lodgement dates.
EOFY can sneak up on you and be overwhelming for even the most experienced investor, so it pays to get started early.