Five investment property tax boosters to help beat the cost-of-living crisis

Are there investment property tax boosters that can help you beat the cost of living crisis?

As a matter of fact, yes, there are.

I have identified five moves property investors can make immediately to help deliver a much-needed cashback tax boost in these tough economic times.

These tasks could ease an investor's hip-pocket burden while improving their property’s value.

If property investors were intending to carry out some of these actions on their investment but hadn’t gotten around to doing them yet, my suggestion is that they tackle them immediately.

Making these easy moves now will maximise your tax return – a much-needed boost given the challenges around the rising cost of living.

The increased interest rates, cost-of-living pressures and rising construction costs would be reasons why investors should get savvy about their EOFY financials.

Our research shows investors are becoming more prudent about their financial arrangements, and their level of engagement is only set to ramp up as fiscal pressures force us all to look at ways of maximising our bank balances.

1. Tackle niggling repairs and maintenance

Small repairs and maintenance carried out now will be immediately claimable.

Our company’s most recent 1000 Assets report shows around one-third of all investment properties to receive post-purchase renovation work, with an average spend of around $25,000 to $30,000 per property.

But even small works can deliver a benefit.

I’m talking about those minor works you’ve been putting off.

Any repair – no matter how small – allows you to claim the cost of materials used to tackle it.

Also, labour costs are claimable if you use a contractor.

Works can include landscaping – something that landlords may be able to carry out themselves with the tenant’s permission.

You also get to claim for costs incurred on pruning, cleaning, gardening and lawn mowing.

Now is the time to act because any costs you incur in June are 100 per cent tax deductable in July.

Miss this window of opportunity and you’ll be waiting another year to get the benefit.

2. Pay your loan interest in advance

In 2022, if you have the means to pay your annual interest bill in advance, it should be a consideration.

Aussies have managed to boost their saving throughout the pandemic with increases in their offset accounts and savings.

I’d suggest devoting some of that treasure chest toward pre-paying your interest bill for the coming year.

The sum you pay is immediately claimable against your 2020/21 tax return.

This move won’t render you immune from looming interest rate rises, unfortunately, but it will boost your position come tax time.

Interest rate rises seem inevitable this year.

However, if you have the means, prepaying a bigger chunk now will give you room to deal with increases as the year progresses, while boosting your tax return immediately.

Also, if you’ve redrawn equity from your investment property’s loan, make certain those funds have been used for investment purposes, or the ATO will take you to the task.

3. Get a depreciation schedule

Depreciation schedules prepared by suitably qualified professionals assign hugely advantageous tax-deductible depreciation to your property’s fixtures, fittings and finishes.

If you haven’t already organised a depreciation schedule, then get onto it today.

Fortunately, investors are becoming more aware of their advantages.

Our most recent 1000 Assets report revealed the amount of time between settlement and ordering a schedule fell to around eight months in 2022 – more than half the time it was in 2016.

For just a few hundred dollars a deprecation schedule can deliver thousands back to the landlords.

That’s an incredible return on investment.

4. Purchase items for your property

While having items fully installed before the end of the year might be a challenge, there is nothing stopping landlords from buying freestanding items that contribute to the rent return.

Look to purchase items that are either free-standing or can be quickly installed.

Maybe it’s a matter of selecting some light fittings or blinds this weekend and getting them in place.

You could choose rugs or even pay in advance for tiles and carpets.

You could also purchase things like pot plants and other garden ornaments, freestanding lamps, and appliances such as a new chest freezer.

All things that will be used by the tenant, help boost the rent and can be deductible.

Also, if you install items worth $300 or less, such as a ceiling fan, you can claim that total cost on your tax return.

Finally – if you can fit it in time, consider installing equipment priced under $1000 as some deduction rules make this type of outlay late in the financial year extremely lucrative in terms of tax.

5. Contact your advisors

If you haven’t already checked in with your property advisors, you must do this before month’s end.

Property managers keep a running tally of deductible repairs and upgrades as part of their annual rental statement, and this will be required reading for your accountant.

In addition, your property manager will provide advice on works they can coordinate in the coming week or so to help improve your deductions by year’s end.

The other great thing about professionals is that their fees are tax-deductible.

Don’t forget to include those professional costs as part of your tax return this year.

About Mike Mortlock Mike Mortlock is a Tax Depreciation expert, Quantity Surveyor and Managing Director of MCG Quantity Surveyors. He is a regular property commentator having been featured in the Financial Review and Sky Business. MCG Specialise in Tax Depreciation Schedules and Construction Cost Estimating for investors. You can visit them at www.mcgqs.com.au