In this article:
Claim all your allowable tax deductions
With tax time upon us, be sure to claim everything you’re entitled to as a property investor.
Allowable tax deductions include insurance, council rates, water charges, land tax, cleaning, property agent fees, body corporate fees, pest control, repairs and maintenance and interest expenses. Most of these expenses could be claimed now if the cost was incurred this financial year.
To be eligible, you can only claim deductions for the period during the year that your property was rented or genuinely available for rent. And you must be able to prove your claim with a receipt or bank statement showing that you were the one to pay the expense, not your tenant.
- Useful Reading: What Property Investors Should Know at Tax Time
Novice or seasoned investor, we can help
Get a property deprecation schedule
Repairs, maintenance and improvements can be a tricky area to understand because some expenses are claimable immediately. In contrast, others must be spread over several years. Basically, ‘repairs’ refers to rectifying damage or deterioration to the property. ‘Maintenance’ refers to the work you undertake to prevent decay. These costs are usually claimable in the year you paid for them.
By contrast, ‘improvements’ that enhance the condition or value of an aspect of the property can’t be claimed in the year in which you incur the cost. Examples include building an extension, removing an internal wall, installing an oven or air-conditioning. Known as ‘capital improvements’ by the ATO, they are either claimable as a capital works deduction or depreciated over the life of the asset.
To claim depreciation, you need a depreciation schedule. A qualified quantity surveyor can put this together for you, listing the property’s depreciable items and allocating a cost to each over its useful life. Each year this schedule will help ensure you’re maximising the depreciation deductions for your investment property.
Health check your mortgage
Even a small interest rate reduction equals large rewards. There is much to be gained by checking you’re not paying more interest than you should. Considering the cash rate is at an unprecedented low, there’s a real opportunity to boost your cash flow with interest savings. Speak to a Yellow Brick Road mortgage broker about how to get a better deal, either by lowering the interest rate or reducing the fees and charges.
Scrutinise the daily costs of managing your property
Whether or not you hire a property manager is an individual choice, but it’s crucial to be sure you’ve chosen the most cost-effective option. Tally up your property management expenses and compare options. Would you be better off mix-and-matching the management, by using a professional service to look after the letting, while you deal with tenant issues? Could an online property management service give you a better price than a traditional property manager and if so, what extra work does that involve for you?
If you already DIY the management of your property, consider how you can make the process more efficient, such as by using online apps and tools. If you decide to stick with using an agent, be alert to hidden costs and be sure they deal with tenant maintenance requests cost-effectively.
- Useful reading: 6 Ways to Check if Your Property Manager is a Good One
Keep good tenants
Good tenants will save you money by treating your property as their own and taking care of it. Losing a good tenant leaves you to deal with the uncertainty of vacancy and the advertising costs of finding another suitable tenant. Add to this, the expense of cleaning and making the property rent-ready. If you’re fortunate enough to have great tenants, do what you can to hold onto them.
- Useful reading: How to Find and Keep Good Tenants
Protect against wear and tear
Although wear and tear are inevitable, you can slow its progress with regular maintenance. The simplest maintenance, such as cleaning airconditioning units and checking for water leaks, can significantly reduce the cost of replacement or repairs. The longer the issue remains ignored, the more chance it will escalate into a bigger, more costly problem to fix.
Always work with reputable tradespeople and never pass out a job before getting three quotes. If your property manager looks after all this, talk to them about possible options for reducing the costs of trade call-outs.
When renovating, be intentional about paint colours and flooring choices. Greys and browns are easier to touch-up and maintain compared to light walls and carpets. Floorboards look stylish yet don’t require the cleaning of carpets. Focus on practicality and budget rather than your personal preferences.