They say in life there’s two things you can’t avoid – death and taxes.
However, through strategic property investment, we’re here to tell you otherwise!
Having nearly hit the six month mark of the year, many investors are scrambling to know what they can claim on their property tax returns, so here at AllianceCorp, we’ve done the groundwork for you and generated our top 7 tax return tips to maximise your property tax returns for 2023.
How To Amplify Your Property Tax Return For 2023:
1. Depreciation Costs
Depreciated cost refers to the value of an asset minus all of the accumulated depreciation that has been recorded against it.
In the instance of property investment, any property that generates income may be eligible for considerable returns in depreciation deductions. In fact, most investors can claim an average of $5,000 – $10,000 in the first full financial year alone. Property depreciation is often missed as it is a non-cash deduction; that is, the investor does not need to spend money in order to claim it.
2. Rental Income & Additional Expenses
While the Australian Taxation Office (ATO) considers rental income as a taxable income, investors can claim expenses to reduce this amount during your 2023 investment property tax return – including but not limited to:
- Property Management and advertising fees
- Maintenance/repair costs
- Depreciation costs
- Any bank fees and/or loan charges
- Insurances (i.e. landlord insurance, home and contents insurance)
- Legal costs
- Land tax
- Body corporate
- Council rates
- Water charges
- Cleaning, gardening and lawn mowing
- Pest control
- Interest expenses
3. Repairs, Maintenance & Renovations
Repairs to a property pertinent to any ‘wear and tear’ can be deducted. Examples of this include replacing damaged gutters, fixing a fence damaged by a falling tree branch roofing after a storm, essential appliance repair or roof repair.
However it is important to note that repairs where full replacements are done to appliances cannot be deducted and the rule above applies.
4. Leverage A Split Report
For those who co-own a property, it’s a great advantage to organise a split report in order to maximise the returns for each owner.
To ensure that clients who co-own investment properties are maximising deductions, it is important that this recommendation is made by a qualified Accountant.
5. Amend Existing Returns
Many investors oversee the fact that they have the option to amend two previous tax returns to claim any missed deductions.
The best way to achieve this is to engage an expert such as an Accountant who specialises in property, a Quantity Surveyor or alternatively, a property investment strategist such as those at AllianceCorp!
6. Capitals Gains Tax (CGT)
If you sell your investment property within 12 months of owning it, you are required to pay CGT on the profit of that sale.
In Australia, capital gains are taxed at the same rate as taxable income. For example,if you earn $40,000 (32.5% tax bracket) per year and make a capital gain of $60,000, you will pay income tax for $100,000 (37% income tax) and your capital gains will be taxed at 37%.
However, if you own the investment property for more than 12 months before selling, you are eligible for a 50% discount on your CGT which means you will only need to include half of the capital gain in your tax return.
7. No Tax Paid on Withdrawals from Equity Loan
For any money that you withdraw through an equity loan, you will not need to pay tax.
What this means is that if your property goes up in value and you don’t want to sell your property, you can actually access a portion of that money through getting a loan from the bank. While this increases your loan and monthly repayments, you still get access to that portion of money.
By doing so, because it’s not technically a ‘gain that’s been accessed, you haven’t actually increased your financial status through the equity loan, and as a result, tends to not be a tax-deduction.
This option provides significant benefits to investors as it means you can leverage the property tax return money to purchase more investment properties to accelerate your portfolio growth.
For more information on tax deductions, property tax return and property investment head to www.alliancecorp.com.au and request a no-obligation, 45-minute consultation with a Senior Property Wealth Planner valued at $495 absolutely free!