Many people invest in property with a view to making a significant capital gain and for taking advantage of well publicised tax breaks. If you have property investments or are considering entering the market, our first piece of advice is talk to us about the often missed tax opportunities. Everyone has heard about negative gearing but there may be thousands of dollars of other tax breaks you are missing out on. Here are a few suggestions.
Use a quantity surveyor
A registered quantity surveyor can establish the value of your purchased items and building construction costs by preparing depreciation schedules to maximise your claims. There is a great diversity of items that are all legitimate claims. The cost of using a quantity surveyor is also tax deductible.
It is common for investors to bundle a mix of properties under one single loan. Typically, the family home and a rental property may be funded by the same mortgage and expenses apportioned accordingly. However, having separate loans can increase your deductions as the non-deductible debt can be paid down. Even better, it can be linked to an offset account, with the deductible loan having full interest paid and claimed.
Claim travel expenses
If you travel to your rental property for management purposes, the trip can be claimed as an expense. But be aware that if you combine that trip with a holiday, you must apportion the expenses accordingly.
An immediate write-off applies to items worth less than $300; they can be claimed in the current income year. Items such as kitchen cutlery, ironing boards and irons and even a humble garden gnome are easily forgotten if you don’t keep good records.
It is possible to claim a portion of the construction costs of building in your income tax return. Construction costs can generally be depreciated at 2.5% each year over 40 years for residential properties built after July 1985. This entitlement passes from one owner to the next whenever the property is sold. You will need a quantity surveyor to determine the building's construction cost.
There are other items associated with an investment property that can be claimed at higher rates. These would include items like carpet, curtains and ducted heating. Depreciation for these types of items are typically claimed at greater percentages in the first few years.
Talk to us
Some of the things we have discussed need to be well thought out before you action them. There may be all sorts of scenarios and alternatives. The most important thing to do is to talk to us before you buy a property. If you already have one or more, there may still be opportunities you are missing out on.