With just two weeks left before the end of the financial year it is pertinent to incorporate some tax tips with this week's market wrap.
The Melbourne market rebounded last weekend with a surprisingly high auction clearance rate of 80%. There were 781 auctions with 624 properties selling and 157 been passed in, 67 of those were on a vendor bid. Once again houses outperformed apartments with 84% selling with still respectable 73% of apartments selling under the hammer.
Traditionally winter has been a period of hibernation for the Melbourne property market, but not this year, last weekend's surprisingly high number of options is followed up with about 870 auctions scheduled for next weekend and there is no shortage of buyers as the high clearance rate proves.
I read an article in the weekend newspapers that should shock every property investor… taxpayers are leaving a whopping $1Billion on the taxman’s table every year. I know from my own experience coaching property investors and business owners over the past 20 years that too many people don’t claim all their entitlements.
There seems to be two key reasons for this, a lack of awareness and understanding by the tax payer and a level of ineptness from their tax advisor. In my view too many accountants and tax agents are little more “field officers” for the tax office.
If you are a property investor, you absolutely need a property specialist accountant. You need an accountant who will challenge you, challenge what you provide them, ask you questions about your expenditure. He should know where your properties are located, if they are new or old, if they have been renovated or in original state, when they were built, how long you have held them. They should be asking you what loans you have, how they are structured, where you deposit your rent, where you pay draw payments for your property bills and a dozen other questions.
If your accountant doesn’t have a thorough understanding of your investment activity then he probably resembles the tax office “field officer” and you need a new property specialist accountant who knows you and your investment inside-out.
If you don’t have such an accountant give me a call and I will refer you onto one.
If you want to get your full tax entitlements and stop subsiding those who do, here’s a few ideas you might consider:
- The most lucrative tax deduction property investors are entitled to is depreciation, if you don't have a depreciation schedule rush to get one before the end of the financial year so that you can claim your entitlements in the current year.
If you need a quantity surveyor send me a quick email and I will send you a contact where you can get a discount report.
- If you use your car for any kind of income producing activity, keep an official log book, it’s the only way to get ALL your entitlements
- Consider salary sacrificing into your super, make sure you know your maximum legal contribution, penalties for excessive contributions can be punitive
- If you keep a home office, ask your accountant about claiming deductions… but careful you don’t lose your CGT exemption status
- Make sure you claim $300 every year as a bare minimum as allowed under tax rules with or without receipts
- Keep ALL receipts for every expense you incur as a result of the ownership of your investment property, eg: paint, lawn seed, repair kits, tools, mower fuel etc if used to maintain your investment property
- Make sure you visit your investment property once or preferably twice per year and claim the expense incurred in the travel
- Keep a record of your meetings with your property manager and claim the expenses incurred
- Consider all expenses related to your property investment including; software, platinum/silver subscriptions, property magazines and newspapers, landlord insurance, owners corporation fees, rates, bank fees, interest costs, accountancy and bookkeeping fees etc.
- Consider bringing forward expenses into the current financial year, this is particularly valuable if the current financial year has a higher taxable income than next financial year
Call your accountant to do a tax planning session (it will be interesting to see how many questions he asks you about your affairs), have a list of your own questions ready too).
Of course, this blog is of a general nature and should not be considered tax advice but could prove invaluable in using it as a basis of the next conversation you had with your accountant or tax agent.
Finally, don’t hesitate to call Andrew Gardner on 8621 8484 to discuss any of the issues raised in this article.