7 top property investment tax tips

As June 30 fast approaches what should the savvy property investor be doing to prepare for tax time? 

Let’s have a look at 7 property investment tax tips: 

1. Documentation

Summaries of all your rental income and expenses.

This is much easier if you have your management agent looking after your property where they pay all expenses and collect all income. They will normally provide a monthly and annual statement.

Ensure you have all bank statements showing interest expense. The annual statement should show a summary of interest expense.

A specialist property accountant can assist by ensuring all allowable tax deductions are made.

2. Prepayments

Prepayment of expenses including rates, insurance and other annual charges can help reduce current year’s tax.

Interest prepayments can only be made if interest is at a fixed rate not if variable.

3. Depreciation

Only registered quantity surveyors are generally authorized to prepare depreciation schedules.

If you are contemplating a renovation a quantity surveyor can produce a scrapping schedule which puts a value against all items to be thrown away. This value is expensed in the year of expenditure. The new items are then depreciated with a new depreciation schedule.

4. Travel

All your costs to inspect your investment property are tax deductible, including travel. Ensure you apportion any personal component.

5. Interest Expenses

Only interest expenses on borrowed funds used to invest are deductible.

It is the purpose of the loan which determines deductibility not the security used to obtain the loan.

A split loan should be considered when a loan is used for both investment and private purposes

If capitalizing interest the tax office may require evidence of correct documentation and intention.

Interest deductibility should be easy but if not properly documented and managed this expense can cause frustration if the ATO decides to review and so the assistance of a specialty property accountant should be used.

6. Trusts

The use of a Trust can be a major benefit to property investors by improving asset protection, estate planning and increasing flexibility.

If using a Trust ensure it has been correctly set up and operated to ensure you do not lose your interest deductibility which is fully allowable by the ATO if you meet their requirements.

7. Cash Flow

If the property is negatively geared consider applying for a 1515 Tax Variation so that your tax is reduced each pay and not at year end. This will improve cash flow and could assist in reducing your overall interest charges.

Ask your management agent to deposit rental income within 7 days of receipt not at month end.

If you have an apartment without individual water meters put a special condition in your lease that the tenant will pay water usage as billed to you.

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Ken Raiss


Ken is director of Metropole Wealth Advisory and gives strategic expert advice to property investors, professionals and business owners. He is in a unique position to blend his skills of accounting, wealth advisory, property investing, financial planning and small business. View his articles

'7 top property investment tax tips' have 1 comment

  1. Avatar

    June 10, 2012 victor

    “If you have an apartment without individual water meters put a special condition in your lease that the tenant will pay water usage as billed to you.”

    I thought under the Residential Tenancies Act an owner cannot request their tenant to pay the proportional water usage or sewage disposal charge, actually it was on the water bill I received. How can this be done legally?


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