As a homeowner are you taking a huge gulp at the end of every financial year with your rental property tax? Budget changes and changes to record keeping requirements can leave even the most seasoned homeowner in a bit of doubt. Here are four easy (but sometimes overlooked) ways to stay on top of EOFY and maximise your deductions.
1. Having a depreciation schedule
The Australian Tax Office (ATO) recognises that parts of your home depreciate over time. If you have a formal depreciation schedule in place, that means you can claim for the maximum number of deductions as your home ages.
A depreciation schedule is produced by a qualified quantity surveyor. Your plant and equipment (fittings, fixtures, utilities and appliances) can be depreciated. A surveyor’s job is to quantify these items based on ATO regulations.
When should you get a depreciation schedule? The sooner the better for maximising your tax opportunities. Under 2017 legislation, plant and equipment are no longer able to be depreciated over the lifetime of the property. This means a new depreciation schedule is required with each owner. Also, if you have just finished major renovations at your home, this might also be a good time to get an updated schedule.
A good property management consultant will be able to advise you if they think you need a new depreciation schedule and can organise it for you on your behalf. This takes a little of the headache out of the process, and ensures you get a competent surveyor on the task.
2. Keeping great records
Keeping good records is the key to a painless process at tax time. If you have good records in place, you can claim more. It’s amazing how many receipts can go west when we lead busy lives, and this can be a source of frustration when they don’t emerge at tax time. One great way you can alleviate this, is to have a shared filing system with your property manager. All receipts can be filed this way and means both parties are held accountable to keep records up to date throughout the year. If you have a proactive property manager on your side, it also means they can work with you to make recommendations which can benefit you as tax time approaches.
3. Using a good accountant
You might be good with numbers and have previously always done your own tax. However, when you’re an investment homeowner at tax time, it is no longer straightforward. A great accountant can ensure your obligations are met when it comes to your investment home. They also know all the deductions which are relevant to you as a homeowner. This can save you thousands in tax and really is money well spent.
A good property management consultant will probably work with a few trusted accountants who ‘specialise’ in property, or who have proven to do a great job with their client’s EOFY matters around their property.
4. Was your rental home your residence?
If you are moving out of a home you have lived in, it might be a good time to get an up to date valuation. This is so your accountant can calculate accurate capital gains on:
- purchase value
- value when it was converted to an investment and
- eventual sale value
Having to guess the second value may mean you pay more capital gains if or when you sell the home.
Thinking ahead is best
Often a seamless end of financial year as a homeowner comes down to the little things that you do during the year. This includes being organised, having good paperwork and connecting with the right people when it counts. Actually…this is probably true for everyone all the time 😊 Anyway, happy EOFY!