4 Steps to Getting Ready for Tax Time as a Property Investor

With the end of the financial year recently arriving, now is an opportune time to get all of your documents and information ready for you or your accountant to prepare your tax return. As soon as you have an asset such as an investment property to account for each financial year, there’s opportunity for tax savings to derive the most value possible from your property, but you can’t do this without all of the right records. Below, we’ve outlined everything you need to get ready for tax time as a property investor.

Check what income you need to declare

The first thing to check at the end of the financial year is how much income you derived from your property throughout the year. This income will likely include rent, but it may also include rental bonds from tenants who default, or any other booking fees and payments received.

Maximise your deductions

As a property investor, there are a number of expenses you can claim. On their website, the Australian Taxation Office states, “You can claim a deduction for your related expenses for the period your property is rented or is available for rent.” Common deductions you can claim include repairs, management and maintenance costs, interest on bank loans, renovations and improvements, and depreciation. Remember, large scale renovations have to be deducted over several years, similar to depreciating assets, as these are classified as capital works.

Capital gains tax (CGT)

If you sold an investment property in the financial year, you might need to pay capital gains tax (CGT). CGT has to be paid in the year it is incurred. It applies to any profit you make from the sale of your investment property. The capital gain on your property is the sale price of your property less all expenses paid to manage it.

Keep accurate records throughout the financial year

You can save time and headaches at tax time by keeping detailed and accurate records throughout the financial year. If you haven’t already, consider setting aside some each month to review the documents for your investment property. This will include documents such as rent receipts and ledgers, and receipts for repairs and maintenance. Further, having a quantity surveyor draw up a depreciation schedule can help you maximise your deductions. They will estimate the cost to build or renovate your property and estimate the useful life for the depreciable assets in your property.

Tax time provides a great opportunity to assess how your investment property performed throughout the year. Considering what worked well, what didn’t work, and how you can derive more value from your investment property in the next financial year will help you ensure your property is helping you meet your wealth-building goals. Remember to talk to your accountant for specific advice on meeting your tax obligations while maximising your ability to claim the deductions available to you.

Remember, this article does not constitute financial or legal advice. Please consult your professional financial and legal advisors before making any decisions for yourself.