Tax Planning Tips for Property Investors

When tax season comes along, you’ll want to maximise profits, such as your assessable income and allowable deductions. You may also want to defer your capital gains tax. Here in Australia, the fiscal year officially ends on the 30th of June and the deadline for lodging your tax return is the 31st of October. Note these dates and remember the tips below when putting together your tax return.

Maximise assessable income

Rent not paid by 30 June will not be assessable to you for income tax purposes until the end of the next fiscal year. Don’t include prepaid rent as income if you received it on or before 30 June. It will also not be considered income until next year.

Maximise allowable deductions

Expenses on your investment properties can be beneficial, so as long they are not “capital” in nature. Some examples of these are repairs and maintenance, cleaning, gardening, and pest control costs. Once incurred, these costs are immediately tax-deductible. Initial repairs, however, pertain to capital improvements, so delay those for the time being.

If an expense was adjusted in favour of the other party in the settlement of a property you either bought or sold, you can claim a tax deduction on the relevant amount to the extent that the expense would normally be tax-deductible. If the expense was adjusted in your favour, the amount will be included in your assessable income.

If you have sold an investment property but the loan originally drawn down to buy the property remains after the sale, you can still claim the interest on the loan as long as the reason for keeping the loan on foot or refinancing the loan is related to the original income producing purpose of the loan.

Defer capital gains tax

If you are thinking of selling your property, defer the signing of the contract until after 30 June. The time of the sale for capital gains tax (CGT) purposes is the contract date and not the settlement date. If you need to secure the sale before then and want a 50 percent CGT discount, check with your accountant to see if you can hav