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TIPS FOR TAX & PROPERTY INVESTMENT

With recent Federal Budget changes to the real estate market and property industry, investors need to be sure they don’t miss out on making the most of their claims. As we reach the Oct 31 Tax Deadline, property investors need to maximise their assets - and make sure they're doing it correctly. Because. Tax. And. Accountants.

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A RECAP: THE BUDGET CHANGES FOR THE PROPERTY INDUSTRY

  • The First Home Super Saver Scheme allows first-time property buyers to put $15,000 - $30,000 a year into their superannuation (including earnings) for later drawings into their home deposit
  • Retirees given incentives to downsize with up to $300,000 of the sale going into their super, freeing up larger  homes for families
  • Property Investors limited on depreciation deductions to brand new shiny furnishings and equipment and new properties rather than second-hand ones.
  • Tax incentives for investors in affordable housing
  • New Tax Certificate For $750K+ Property Sales
  • The most hard hit of all: Foreign Buyers
     - charged a Vacancy Tax if their property is left empty for 6 months of the year, and
     - a 50% cap on foreign ownership for new developments with no more claims on capital gains tax.

While the government certainly doesn’t make owning property easy, the long-term view of owning real estate stands now more significantly than ever. So be sure to capitalise in the real estate and property market with our Tips For Tax & Property Investment.


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UNDERSTAND YOUR DEDUCTIONS

Make sure you understand the difference between the categories for deductions of Repair, Maintenance and Capital Improvements, because there are different ways to claim on each expense.

Repairs look at fixing damages or renewing parts to an existing structure or article, like
> leaks
> broken fences, glass in windows or guttering
> electrical appliances, machinery and equipment

Maintenance prevents damage, such as
> painting
> maintaining plumbing
> conditioning gutters

Capital Improvements increases the value of the home or property through structural changes, including
> renovations and
> expansions.
This claim also needs to include depreciation over time.


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KEEP A DEPRECIATION CALENDAR

With the new changes to depreciation following the Federal Budget announcement in May, the government has particularly tightened depreciation deductions for residential properties- so this doesn’t include commercial, industrial, retail or any other non-residential properties.

Previously, the depreciation was an income tax deduction recovering the cost associated with wear and tear, deterioration or end of life of the property for investors owning residential investment properties.

Justified as an “integrity measure” by the government, the new action restricts depreciation deductions only to brand new and shiny assets – and not second hand ones that come with the newly purchased investment property. These plant and equipment items are usually mechanical fixtures removable from a property - such as dishwashers and ceiling fans.

The action addresses government concerns items have been claimed as tax write-offs - in excess of their actual value. But really, it creates a costly short-term ripple effect in an already suffering housing affordability market, especially since investors rely on the costings of second hand items when assessing the property’s economic potential. The government has set the standard for investors purchasing second-hand property: they may not be able to claim depreciation on the existing plant and equipment, but they can pay less capital gains tax on the item’s sale price when it comes time to sell the property.

With a Depreciation Schedule, this allows you to accurately make claims against the value of items for its lifespan. Maximise your returns using a calendar diary so you note when and how much you can claim.


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USE A GREAT ACCOUNTANT & LODGE YOUR TAX BY OCT 31

An accountant experienced in investment property is just as much of an asset as owning your property and will see you claim all the necessary taxes, correctly.

Make sure to lodge your tax by Oct 31.

Or extend the Oct 31 deadline by lodging your return through a registered tax agent - without incurring any penalties.


HAPPY TAX RETURNING


 

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