Year End Strategies For Property Owners

July 11, 2011

The end of the financial year is approaching, and it is important to be prepared. This will ensure there aren’t any nasty surprises and as much cash as possible can be protected. Here are some tips to keep in mind:

  1. Personal Expenses

    Be careful and ensure that any claims or interest on borrowing for investment are separated from interest on borrowing of a personal nature.

  2. Substantiate Your Claim

    Keep all receipts to prove any deductions and be able to show why the expense was incurred to derive assessable income.

  3. SMSFs And Property

    Consider moving Business Real Property into a SMSF. This is a good way to free up some cash coming into tax time.

  4. Renovations By Previous Owner

    If the renovations are identifiable and itemized in a depreciation schedule, then it is possible to be eligible for a deduction for depreciation on the cost of improvements by a previous owner.

  5. Capital Gains Tax

    Ensure any capital gains on the sale of property are properly recorded. The ATO are keeping an eye out for any undisclosed capital gains from disposing of assets to invest in superannuation.

  6. Fixtures And Fittings

    If fixtures and fitting cost less than $300, it may be possible to claim a tax deduction.

  7. Self-Education Expenses

    Keep all receipts and documentation relating to self-education, such as seminars and investment related books and magazines, in order to qualify for tax deduction.

  8. Use A Quantity Surveyor

    There are benefits to having a depreciation schedule prepared by a qualified quantity surveyor. They could help gain a significant tax deduction for depreciation. The cost of employing such a surveyor is tax deductible and will help back up a capital allowance claim.

  9. Pre-Pay Interest

    Depending on the lender, it is possible to pre-pay interest to defer the payment of tax. This is dependant on possible future income, interest rates and cash flow impact.

  10. Repairs To Property

    Be aware that although the cost of initial repairs at the time of purchase is not deductible, expenses for repairs further down the track are. They must relate, however, to wear and tear or other damage incurred as a result of earning rental income.

  11. Short Term Holdings

    If a property has been renovated with the aim of selling it at a profit in the short term, the ATO may tax it as if it were a ‘profit making scheme’. If this occurs, it is not possible to take advantage of CGT concessions.