The 9 Best Property Investment Accounting Tips


With the end of financial year coming up soon, I thought I would provide some general tax strategies for property investors to consider:

1. Documentation

Keep summaries of all your rental income and expenses.file folder draw paper office tax document

This is much easier if you have your property manager looking after your property where they pay all expenses and collect all income.

They will normally provide a monthly and annual statement.

Ensure you have all bank statements showing interest expense.

The annual statement should show a summary of interest expense.

A specialist property accountant can assist by ensuring all allowable tax deductions are made.

2. Depreciation

Only registered quantity surveyors are generally authorised to prepare depreciation schedules.

If you are contemplating a renovation a quantity surveyor can produce a scrapping schedule, which puts a value against all items to be thrown away.

This value is expensed in the year of expenditure. The new items are then depreciated with a new depreciation schedule.

3. Travel

In the past all your costs to inspect your investment property were tax deductible, including travel.

A few years ago this was changed and travel expenses to inspect your property or collect rents are no longer allowable.

4. Interest expenses 

Only interest expenses on borrowed funds used to invest are deductible.

It is the purpose of the loan that determines deductibility, not the security used to obtain the loan.

A split loan should be considered when a loan is used for both investment and private purposes.

If capitalising interest the Tax Office may require evidence of correct documentation and intention.

Interest deductibility should be easy but if not properly documented and managed this expense can cause frustration if the ATO decides to review and so the assistance of a specialty property accountant should be used.

5. Trusts

The use of a trust can be a major benefit to property investors by improving asset protection, estate planning and increasing flexibility

If using a trust ensure it has been correctly set up and operated to ensure you do not lose your interest deductibility, which is fully allowable by the ATO if you meet the requirements.

6. Pre-pay expenses

If you have a geared investment it is worth considering pre-paying next year’s interest to gain an immediate tax deduction if you have a fixed interest loan. australian coins save money budget wealth plan piggy bank learn lesson work

You can also get a deduction now by pre-paying next year’s income protection insurance premiums.

Also, consider bringing forward expenditure that would otherwise be spent after June 30.


Source link

Call Us Now