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Friday, May 29 2015

With the end of the financial year fast approaching it's important not only to ensure you don't overstate your deductions but equally ensure you are not missing out on legitimate claims. Here's some common mistakes.

Not using an accountant who understands property

Using the right accountant is extremely valuable. Using an accountant that full understand property investment is critical to ensure your complete structure is tax-efficient and you ae optimising your legitimate deductions. 

The reality is, you should actually be talking to your accountant before you invest in the first place, as the incorrect approach and structure can translate into the loss of thousands of dollars that you would have been able to access. 

Seeking advice after you have already purchased a property is really a bit late in the game. A good accountant will be able to identify all the things you did wrong but you are not really going to be able to fix it. At least not without significant expense.  

Paying down tax-deductible debt before non-deductible debt
Most experienced investors will know that it can be tax effective to pay down non-tax deductible debt before tax deductible, such as your home. Most investors will have their investment properties on an interest only arrangement until they have eliminated non-deductible debt.

No depreciation schedule
A depreciation schedule is the schedule of items that can be depreciated at a certain rate allowing you to claim a tax deduction against your taxable income. It is amazing how many people don’t even have one! It is wise to get your accountant to assist you with this as this can save you thousands.

Trying to claim expenses you can’t
There are certain types of property investing expenses that cannot be claimed as part of your tax return. For example property improvements must be claimed over several years as capital works deductions where repairs can be claimed in the same tax year. Also any conveyancing expenses that you incur during the purchase and selling process cannot be deducted. Instead, these costs make up part of the cost based for capital gains tax purposes.

Keeping the right records
Property investors must keep accurate records, regardless if they prepare their tax returns themselves or not. A record must be kept of the following:
• Rental income and deductible expenses  
• All documents relating to the ownership of the property including all purchasing and selling costs

By keeping all of these documents handy, it will be a lot easier to make accurate calculations and enlist the help of a tax professional.

Posted by: Greg Carroll AT 10:09 pm   |  Permalink   |  Email