There are two types of property investors: those who associate EOFY with stress, and those who associate it with excitement. In a recent survey we conducted with over 60 property owners, we found that stress and anticipation were the top 2 emotions which owners felt during tax-time, with 22% of owners in the former, and another 22% in the latter. But, regardless of which team you sit in, we’ve got your back – tax-time this year is going to be the easiest yet.
Our EOFY checklist takes you through everything you need to do, from the basic to lesser known tips, to everything in between. Get ready to breeze through tax time (and perhaps end up with a bit more money in your pocket at the end of it!).
1. Find an accountant who has experience working with property owners
When it comes to knowing exactly what you can and can’t claim on your investment property, having an accountant who knows the ins and outs of property tax goes a long way. They’ll not only understand how to maximise your tax deductions, but also know what benefits you can get from having an investment property.
Why is a good accountant important? This quote from one owner in our tax-time survey does a pretty good job illustrating why:
“[My biggest challenge at tax-time is] compiling receipts and ensuring my accountant isn’t too risk averse yet ethical and legal”.
Having an accountant who isn’t completely familiar with the big picture of property tax can make it difficult to ensure that you’re claiming all the tax deductions you’re entitled to. If your accountant is overly risk-averse, it becomes difficult for you to make the most of your deductions and maximise your savings - but on the other hand, if they push the limits too much, you’ll run the risk of pushing legal boundaries.
A professional accountant who has experience working with property investors will be well-acquainted with the benefits you can get from having an investment property - so you can trust that they will be thorough and accurate, and help you maximise your tax deductions.
So now the question is: how do you find an accountant who’s experienced in property tax?
You can start by reaching out to any other property investors you know to see if there are any tax accountants that they would personally recommend. Alternatively, you could also connect with your property manager to see if they have relationships with any property tax accountants.
Choosing the right experts to have by your side is key to treating your property like a business - check out this article from moneysmart.gov.au for a list of questions you should ask an accountant before locking them in.
2. Get a depreciation schedule (or update it if you’ve renovated your property)
Claiming depreciation on your property plays a significant part in maximising your tax deductions at EOFY. Trent, an owner who purchased an old three-bedroom house built in 1970 for $500,000, claimed a depreciation deduction of $6000 in the first full financial year for his property.
If you want to take advantage of depreciation deductions on your investment property this year, you’ll need an up-to-date depreciation schedule.
Here’s a quick refresher of the most important things to know:
- A depreciation schedule only needs to be done once, unless there have been significant changes to the property.
- It lists all the depreciable assets in your property, including the property itself.
- It tells you and your accountant how much tax you can claim each year, and on what.
Additionally, there are 2 types of depreciation which you can claim:
- Capital works: this is the building itself, along with anything that’s permanently fixed to the property (think bricks, driveways, and built-in kitchen cupboards).
- Plant and equipment: these are assets that can easily be removed from a building, like blinds, curtains, solar panels, and air-conditioners.
How to get a depreciation schedule
Many owners will be surprised to know that tax depreciation schedules must, in fact, be set up by a professional quantity surveyor - not an accountant. Whilst this is a common misconception among property owners, the reality is that accountants are neither qualified nor recognised by the ATO to estimate construction costs for depreciation purposes.
A professional quantity surveyor will not only inspect the property to ensure that they’ve identified all the assets you can claim, but also talk to the council and other relevant organisations to understand the details of the build. After getting a thorough understanding of the assets related to your property, they’ll prepare your schedule with all the details you need to claim your tax deductions.
This can cost anywhere from $300 to $1000 - and you’ll be happy to know that all of this is tax deductible (with many quantity surveyors offering a money-back guarantee!).
A TDS is an investment that’s worth every penny - and one that will pay for itself.
Add these dates to your diary
Depending on when you purchased your property or when your property was built, you may or may not be able to claim certain types of deductions. Make sure you’re aware of these dates and what they mean for you at tax-time:
- 18 July 1985. If your property was built after this date, you can claim capital works deductions for 40 years after the build. However, it’s worth getting a depreciation schedule even if your property was built before this date, as there may have been renovations completed since then (meaning there could be capital works deductions available to you!).
- 9 May 2017. If you purchased your property prior to this date, you can claim plant and equipment deductions on all assets. If you purchased your property after this date, you can only claim the depreciation on assets you have installed yourself (and nothing installed by previous owners).
If there have been significant changes to your property since your last depreciation schedule, you may want to update it to claim capital works deductions on recent renovations for instance, or plant and equipment deductions for new appliances.
Most importantly, make sure your accountant has a copy of your depreciation schedule so that they can help you claim your deductions.
3. Check off your maintenance responsibilities
Apart from clearing any maintenance requests your tenants have made, EOFY is also a great time to make sure everything else in your property is running smoothly. Take the opportunity to check for any underlying issues that may worsen without preventative maintenance (which, by the way, is also tax deductible).
Start off by checking your most recent inspection reports for any maintenance recommendations from your property manager. Is there any dampness in the walls that shows the early signs of mould? Are there any old appliances which need to be replaced? Is the garden overgrown?
Fixing these small issues ahead of time can not only prevent more complicated issues from developing down the line, but also save you the costs involved in getting them back in order.
Here’s a checklist of preventative maintenance measures that never hurt to be done annually:
- Conduct an electrical inspection on your property
- Check that smoke alarms are in working order
- Conduct a pest inspection
- Replace the filters in your air-conditioning units
- Service your blinds
- Paint tired walls and replace worn carpets
- Inspect the roof for damaged tiles and clean the gutters
- Freshen up your garden
And that’s all for now. By checking these three things off your to-do list ahead of time, you’ll find yourself with significantly less on your plate once July rolls around this year.
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