The end of the Australian financial year is fast approaching and tax time is almost here. So, it’s a good time for property owners to do a quick check in on their property financials.
As your property experts, we’ve compiled a couple of reminders and quick tax tips that can give a bit of guidance, especially if you’re a new property owner.
Preparing for the end of the financial year
To prepare, the best place to start is to look back over your property portfolio over the last 12 months and review any new property purchases, properties you’ve sold, renovations you’ve done, and everything else in between.
As the Australian tax year ends on the 30th of June, the processing for 2020-21 tax returns begins on the 7th of July, mark these important dates in your calendar and start preparing your documents beforehand to save yourself the hassle of rushing around trying to collect them later.
You might also want to take a look at these ATO forms and instructions and tax time toolkits to check which ones apply to your properties.
To provide some extra help, we’ve compiled some general tax tips that will make tax time easier.
- The status of your property can determine your tax concessions
Before you file your taxes, understand the status of the properties in your portfolio. If you’re not currently renting your property to anyone, ask yourself – is your property available for rent? As this can impact how tax affects it.
Consider the following:
- Do you have and are you showing a clear intention to rent the property?
- Are you advertising your property?
- Is it set in line with all the other properties in the area?
- Are your rental conditions reasonable?
If your answers to these questions are all “yes,” then you may be able to claim a deduction for your rental property. Just remember to always prepare the supporting documents for your claim or speak to your accountant.
2. Make sure all repairs, improvements, and construction costs are recorded properly
Keep a track of all the expenses and investments you’ve made on each of your properties, as these may allow for some tax dedications.
For instance, did you know that you can claim a 2.5% deduction of the construction costs for 40 years from the date when the construction was completed? So, if you paid for initial repair after purchasing a property or had to fix damages that resulted from renting out your property, you can claim deductions for the cost.
If the previous owner claimed capital deductions for the construction of your new property, you could ask them to provide these details so you can calculate the deductions that you’re entitled to claim. You may also ask for a professional’s help to estimate the construction costs for you.
All building costs such as extensions, alterations and structural improvements can also qualify for capital works deductions, so be sure to keep your receipts for all these expenses.
3. Take note of your capital gains and losses
Your capital gains or capital losses refer to the difference in dollar value between when you bought and improved a property to what you receive upon selling that property. It is important to get these values right when preparing your tax income return as these records affect your deductions.
If you make a capital gain, you must include the gain in the income year that it was acquired. On the other hand, a capital loss can be carried forward and be deducted from capital gains in later years.
As you invest in properties, you must ensure that you are being tax-smart and all the gains and losses are recorded properly – this will make tax times easier for you.
4. Organise your records
Whether you’re a buyer, an owner or a seller, keeping a detailed record of all your income and expenses is a crucial step in preparing for the end of a financial year.
Keeping your documents organised during the entire year instead of trying to source them all when tax time approaches can be stressful, and you may even miss some. Try scanning all transaction receipts so you could keep them in one place – this includes all your loan documents, contracts of purchase and sale, and all other expenses.
It doesn’t matter if you use a simple spreadsheet or professional software, what matters is that you have everything prepared. This way, you can avoid the struggle of collecting everything during tax times.
At Upstate, if you’re leasing your home with us, our Property Management team keep a record of everything that goes through us, and then we provide a summary report at the EOFY period, so you have everything in one document.
5. Ask for an expert’s help
The ATO says that nine in ten individuals make mistakes when reporting rental income and deductions, so you might want to seek an expert’s help in filing your taxes this year.
The first person to start with is a quality tax accountant as they can provide more specific advice that’s suited to your circumstances and financial goals.
As part of our commitment to helping you find yourself in a better place, Upstate can help you prepare and manage your properties effectively, especially around tax time.
We’re not only your real estate and property specialists. We have property financial experts, a Property Management team and a complimentary Concierge Service, all of whom can be there to support your needs.
Contact your local Upstate team today and we’ll help you find yourself in a better place.
