For most rental property owners, their property or portfolio of properties is part of a long-term investment strategy. As a Chartered Accountant, financial planner, real estate developer, and rental property owner, I have learned many strategies for how to successfully invest in property and maximise your return. Over the coming weeks I will be sharing some of my tips on getting the most out of your rental property and how to strategically invest in property.
While long term gains may be the primary focus of owning an investment property, it is important not to miss out on potential tax savings along the way. Income from your rental property is relatively easily to record. While most expenses relating to a rental property will be deductible, saving you income tax, not everything is deductible, nor can everything be deducted straight away. Before you spend money on your rental property, identify which category the spending falls into so you understand the tax implications of your decision:
- Outlays which are deductible in the year they are incurred
Examples of these types of outlays include council rates, water rates, insurance, interest on investment property loans, management fees, advertising for tenants, or minor repairs like fixing a broken tap.
- Outlays which are deductible over a number of years
Generally these outlays will provide a benefit for more than one year. Examples are building a new deck, putting on a new roof, or significant renovations of a bathroom or kitchen.
- Outlays which are not deductible
As of May, 2017 when the federal budget was announced, owner travel expenses to their residential rental property are no longer deductible. Also, investors who purchase an established property as an investment on or after 10 May 2017 can no longer claim a deduction for depreciation of plant and equipment items acquired through the purchase.
Top tip – Make sure you retain records of all income and outlays so that when your income tax return is prepared at the end of the financial year, you can substantiate all deductions you are claiming and do not miss out on deductions by forgetting to claim them.