We can’t help but get caught up in footy finals fever this week. Where do your loyalties lie?
We put the hard questions to our staff . . .
Maximising your tax savings with your investment property
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
- Depreciation
However, what about those items which are not so common?
Landlords Insurance
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.
Depreciation Report
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.
Travel Expenses
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.
What next?
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.
VCAT demystified
VCAT; a place property managers can sometimes end up but a destination we try to avoid.
So what is VCAT? VCAT stands for the Victorian Civil and Administration Tribunal and it’s a place where members of the public can bring their case forward to be heard in front of a judge in a less formal setting than a court. Basically, it is designed to facilitate dispute resolution between opposing parties without the fees and formalities of court.
While avoiding VCAT is an ideal situation, sometimes things can go wrong. When disagreements arise, we will try and mediate between landlord and tenant to come to a mutually agreeable outcome without having to escalate to VCAT. However, should all parties involved not be able to reach a resolution on their own, a landlord’s agent (i.e. The Hopkins Group) or tenant may need to resort to filing an application to attend VCAT.
As representatives of the landlord, we can do all the administrative work on behalf of the owner and can also attend VCAT hearings on your behalf; however landlords are of course allowed to be present for the hearing if they would like. We encourage that our landlords attend their VCAT hearings, but it is not essential.
Why would a property manager need to take a case to VCAT?
One of the most common reasons property managers end up taking their tenants to VCAT is to try and gain possession of a property after a tenant has not paid their rent.
There is a lengthy process in trying to gain possession – once a tenant is 14 days in arrears you are able to serve a 14 day notice to vacate. Three business days after the 14 day notice to vacate is served, an application to VCAT can be made. The Hopkins Group can look after all this administration on behalf of the landlord.
Once an application has been made, VCAT will then schedule a hearing in which all named parties must attend – this is usually set within two weeks of making the application. The named parties in this case are the tenants and the landlords, who can be represented by The Hopkins Group.
Another common reason property managers attend VCAT is to claim money from their tenants’ bond after they have vacated, to carry out repairs or cleaning needed to bring the property into a reasonable condition.
To try and claim anything equal or less than a tenant’s bond, a standard hearing is all that is required. However, if the amount of money we need to claim exceeds the bond amount, a more complex hearing will need to take place to try and gain possession of both the bond and additional compensation.
In both instances, invoices are required to be presented as proof that works have been completed and are equal to the compensation claimed.
How do you serve a VCAT application?
Applications are served online through the VCAT website; there are also hard copy forms that can be completed.
Once your VCAT application has been finalised, you will need to post a copy via registered post to the respondent in addition to a copy mailed via regular post.
We also recommend emailing a copy of the notice to the respondent to ensure all bases are covered.
The last thing you want is to be bogged down in paperwork. As your managing agents, we can take the hassle away from you and manage these steps behalf of a landlord.
What happens during a VCAT hearing?
There is a lot of preparation that takes place before a VCAT hearing – we need to ensure that we have all the evidence we need to support your case, including copies of all documentation for both the member and the respondent (the tenant).
Then, once everyone has been gathered at VCAT, all speaking parties are required to be sworn in to be heard by the presiding member – an impartial official versed in the law. Parties either swear in on the bible or take an oath or affirmation to declare that everything they will say in the hearing is true and correct.
Once everyone has been sworn in, it’s time to present your case!
The applicant will then present their case first; after the member has heard the applicant’s claim, the respondent will then have their chance to speak. After the member has heard a sufficient amount of evidence, he/she will determine the outcome. A VCAT order is then given to both parties (either immediately following the hearing or posted in the mail) with a summary of the member’s findings from the hearing.
How can you avoid a VCAT appearance?
Most of the time, we can avoid going to VCAT by coming to agreements with your tenants before disputes develop or escalate. We can achieve this by having all tenants pay their rent by their due dates – our team runs daily ‘rental arrears’ reports to chase up any tardy tenants so we can stay on top of it before it gets out of hand.
We also carry out regular routine inspections – initially at three months and then every six months according to the Residential Tenancies Act. This ensures they maintain the property in an immaculate condition and if there are any issues, we can nip them in the bud early. The main objective is to ensure the tenant can vacate the property without issue at the end of their tenancy.
What if I have a pending VCAT appearance?
Attending VCAT can be a very daunting experience, but with the right preparation it doesn’t need to be.
The best advice I can offer is that there is no such thing as over preparing. The more information we have, the easier it is to answer any question the member throws our way. In the lead up to a VCAT hearing, we will stay in touch with our landlords to make sure they’re aware of the issue and the current state of play, and keep the lines of communication open throughout the whole process.
While VCAT is an extreme we hope we never have to resort to, it is always good to know you have someone on your side should the worst happen. Navigating our way through the VCAT maze is just part of the service offering we provide to our clients.
Our property management team has extensive experience in dispute resolution and gaining the best results for their landlords. We know your rights and our obligations under the Residential Tenancies Act and have systems in place to minimise the need to make applications to VCAT.
If you would like to find out more about placing your investment properties in the safe hands of our property management team, why not contact us today?
Somersault into your super thanks to a backflip from the Government
It’s been a week since the Federal Government announced its backflip on its proposed superannuation reforms, and now that the dust has settled, it’s time to look at the impact the reworked measures will have on your plans for retirement.
Back in May at The Hopkins Group’s annual economic briefing, #ECON16, you might remember our discussions around the proposed $500,000 lifetime non-concessional cap. Managing Director Michael Williams laid out a bleak scenario for clients who, if they’d exceeded the cap, would have to find other avenues – outside of superannuation – to direct their retirement savings into.
“As we all know, superannuation is a tax effective environment in which to store your money, with a maximum tax rate of 15%. Once you’re in the retirement phase, a zero tax on earnings applies,” says Shane Light, Head of Advice at The Hopkins Group.
“That’s much nicer than a tax rate of assets held outside of the superannuation environment – up to 47.5%. People like the tax conditions that super offers.”
So it goes without saying that there was a huge amount of backlash in response to the Federal Government’s proposals, considering the existing annual non-concessional contributions cap is $180,000 – a far cry from the less-than-generous $500,000 over a lifetime (backdated from 1 July 2007).
But the powers that be listened. And they folded.
Treasurer Scott Morrison has come to the party and last week announced changes that allow people making voluntary after-tax contributions to their superannuation to do so, providing their balance hasn’t exceeded $1.6 million.
The changes are more aligned with the current model with an annual cap of $100,000 (commencing 1 July 2017) – still $80,000 less than the status quo, but much more generous than the half a million lifetime cap that was proposed in May.
“These revisions to the non-concessional cap proposal give our clients so much more flexibility when planning for their retirement,” says Shane who acknowledges that whilst there are more options for clients now, time is of the essence.
“It’s still a ticking time bomb though and the closer you get to 65, the harder it is to be strategic with your retirement plans. You just run out of time, and unfortunately we can’t move the cut off ages. There’s no turning back the clock!”
Shane says it’s important to act now and seek advice on how to best structure your savings to make the most of the years you have left in the workforce.
“You don’t want to find yourself ‘too old’ to make the non-concessional contributions that you had planned, and be left stuck with lump sums of money outside of super in a less tax effective environment,” he warns.
Individuals aged under 65 will continue to be able to ‘bring forward’ three years’ worth of non-concessional contributions in recognition of the fact that such contributions are often made in lump sums. But what does this mean?
If a 59 year old client was to sell an investment property and have $600,000 cash at their disposal, they could take advantage of the bring forward rule and put $300,000 (i.e. three years’ worth of non-concessional contributions post 1 July 2017) into super in one lump sum. The final $300,000 would have to sit outside of super for another three years, after which it could be deposited as another lump sum making use of the bring forward rule again. Within four years, the whole amount would be wrapped up in super.
On the flip side, if that client was 65 or older, that $600,000 would have to go in to super in instalments of $100,000 every year for six years (providing they now meet the work test), opening up the client to huge tax implications with $500,000 sitting outside of super in the first year, $400,000 in the second and so on.
“We try to find the most tax effective solutions for our clients to make sure they’re maximising their retirement savings and their money is working for them. Super is a good option and we’re pleased to see the Government has had second thoughts on their harsh budget measures,” says Shane.
“We look forward to talking to clients about making the most of these revised caps and encourage people to speak to their adviser about any age limits that may apply to them.”
Of course, nothing is set in stone and it’s just a proposed change at this stage. The government’s revised superannuation package still has to be passed by the Parliament.
For more information on what cut-off ages and caps apply to you and your retirement plans, call us on 1300 726 082 and ask to speak to a financial planner.
Zero per cent vacancy in August 2016? It happened!
With more than 35 years’ experience in providing our clients with expert advice about investing in quality property, we understand that your investment is important.
An investment property leased in a timely manner, to a quality tenant, is a landlord’s dream come true. So let’s introduce you to the team that made dreams a reality this August, achieving 0% vacancy across their portfolio of 657 properties.
Lorena Smirnis, Head of Property Management
Joining The Hopkins Group in 2010, Lorena pioneered the property management service offered to our clients today.
On what zero vacancy means for our landlords, she said:
“A low vacancy rate means there is strong demand from tenants which in turn strengthens cash flows and is a peace of mind for investors.”
Kristy Herbert, Senior Property Portfolio Manager
With more than 17 years’ experience in the property industry, Kristy has tried her hand at a number of roles that have helped shape her client-centric approach.
Reiterating Lorena’s message, Kristy added:
“Lower vacancy means the landlords have more rent in their pockets.”
Tannaya Jessop, Property Portfolio Manager
Beginning her career as a receptionist at a popular real estate agency, Tannaya was quickly promoted into a property management position. Since starting at The Hopkins Group, Tannaya has developed her skills as a property portfolio manager, forging strong relationships with both landlords and tenants alike.
On her role in achieving zero percent vacancy, Tannaya said;
“To ensure minimal vacancy [I would] open my calendar for inspection as many days as possible to have people view the property publicly or privately.”
Samandah Matty, Property Portfolio Manager
Samandah balances the often intense demands of property management with great professionalism and a genuine sense of pride. She skilfully responds to tenants with a can-do attitude while representing her landlords with their best interests at heart.
On what the team’s result means for her landlords, she shared the same message as Lorena and Kristy, stating:
“With lower vacancy rates, our landlords are not at a great loss of money between tenancies”
Lauren Wilden-Ross, Property Portfolio Manager
Lauren began her career in property in 2011, securing an assistant property manager position at a Richmond based real estate agency. From there Lauren developed her skills as a property manager, priding herself on delivering a level of service to ensure client satisfaction.
She outlines an efficient way The Hopkins Group can ensure properties get snapped up quickly, in a move that benefits both the landlord and the incoming tenant:
“We have a separate clause in our lease agreement for tenants that can apply for properties as “sight unseen” – this helps to minimise vacancy and ensures that as soon as tenants move from interstate, they have a residence ready to go!”
Claire Weekley, Leasing Consultant/Property Portfolio Manager
The newest permanent recruit to the property management team, Claire manages a small portfolio while also assisting the property management team with the leasing of their properties. From preparing leases to fronting open for inspections, Claire is the lady on the ground liaising with potential tenants, current tenants and landlords with enthusiasm and a professional attitude.
To ensure low vacancy Claire says she tried to pre-approve tenants, “taking time to arrange private inspections when times available don’t suit”. Of the result she added, “lower vacancy shows how hard we work to ensure our clients get the highest return from their investments.”
Our property management team is here for both tenants and landlords alike, to make renting a property a smooth journey end to end. To help us achieve zero vacancy our property management team is supported by a team of administrative staff, trust accountants and open for inspection staff. Our team have worked hard for a great result for our landlords.
If you would like to find out more about entrusting your property with the team that cares, please fill out the form below to receive your copy of our landlord information guide or call our office on 1300 726 082 to speak with someone from our team today!