Maximising your tax savings with your investment property
29/09/2016 Linda Vong, Accountant
One of the most popular strategies for saving on tax is to take advantage of negative gearing – especially in an investment property context.
A negatively geared investment property is where the cost of owning the property exceeds the income made from it. This loss can then be offset against your other income such as salary and wages, thereby lowering your tax liability. As such, when you own a negatively geared investment property, it becomes important to claim as many deductions as you are legally entitled to in order to maximise your tax savings.
But what deductions are you entitled to? Most people would be familiar with the basic deductions such as:
- Interest on your mortgage
- Council rates
- Body corporate fees
- Repairs and maintenance
However, what about those items which are not so common?
Landlords insurance is an insurance policy that covers a property owner from financial losses connected with rental properties. Different policies cover different things but the 3 must-haves are:
- Theft or burglary by tenants or their guests
- Malicious damage or vandalism by tenants or their guests
- Loss of rent due to tenant default
The good news, the cost of the annual premium is tax deductible to the landlord.
For more information on landlords insurance, please see our recent blog post.
Most people know you can claim depreciation against rental income. But what if you don’t have a depreciation schedule?
There are organisations out there whose job is to provide historic depreciation schedules for existing properties which are now being rented out. They attend the property and look at fixtures and fittings (think carpets, ovens, hot water services) and the construction costs (think initial cost of building the property plus the cost of any structural renovations) and from there they provide you with the figures you can claim in your tax return each year.
Plus, the invoice for their time to do this is also a tax deduction; a double bonus!
Body Corporate Fees … not always deductible
Most of us know that body corporate fees are deductible. However, not all body corporate fees are deductible.
Payments made to administration funds and general purpose sinking funds are deductible. However, if the body corporate requires you to make payments to a special purpose fund to pay for particular capital expenditure, these levies may not be deductible and it would be best to check with your accountant.
If you travel to inspect or maintain your property or to collect the rent you may be able to claim the costs of travelling as a tax deduction.
If you fly to inspect your property, stay overnight and return home the following day, all of the airfares and accommodation expenses would generally be allowed as a deduction provided the sole purpose of the trip was to inspect your rental property.
Where travel was incidental or combined with a holiday or private travel then apportionments will need to be made.
Have you made the most out of your investment property this tax time? If you’re yet to complete your tax return this year or need assistance with prior year returns, our dedicated accounting team are here to help. For more information, check out our rental property checklist.
With an in-house property management team and more than 35 years of property investment experience to draw on, we know how to help you get the most out of your investment property.
Give us a call on 1300 726 082 to discuss your tax needs with one of our accountants today.
Travelling to Inspect Your Rental Property? Pause before you go
09/03/2018 Ivy Guo, Graduate Accountant
Before you claim a deduction on your rental property travel expenses, it's best to check you're eligible to continue making that claim.
How will changes to depreciation deductions affect you?
27/02/2018 Bobbie Adams, Senior Accountant
Recent tax law changes might see a loss in deductions available to property investors. But is there a silver lining for those purchasing new and/or off-the-plan properties?
Tax on vacant residential property
15/02/2018 The Hopkins Group
On 1 January 2018, the Vacant Residential Property Tax came into effect in Victoria. So what does this mean for you?