As the financial year draws to a close, property investors are encountering a unique array of challenges in a swiftly evolving market.
With interest rates steadily climbing, landlords must proactively optimise their tax returns and enhance their financial outcomes. To aid landlords in navigating these hurdles, esteemed property investment expert Lloyd Edge presents a comprehensive set of indispensable tips for property investors, ensuring they maximise their financial advantages during this critical period.
Lloyd Edge, renowned buyer’s agent and author of “Positively Geared” and “Buy Now,” embarked on his property journey at the age of 28, purchasing a one-bedroom unit while earning a modest teacher’s salary of no more than $70,000 per year.
Since then, he has cultivated a property portfolio worth $20 million and assists Australians in building wealth through property investments. With years of experience guiding investors towards successful property ventures, Lloyd comprehends the significance of leveraging every available opportunity to boost returns and mitigate risks.
Lloyd remarks, “Given the current surge in interest rates, it is imperative for property investors to adopt proactive measures to optimize their tax returns and enhance their financial outcomes. By claiming all entitled benefits, including maximizing depreciation and accounting for all costs, investors possess the potential to transform a negatively geared property into one that yields a positively geared outcome after tax.
Many investors overlook these advantages, which can substantially affect their overall financial position. Landlords must seek professional advice and stay informed to make the most of their property investments.”
Lloyd encourages property investors to consider the following steps to maximize their financial benefits during tax time:
PAYG tax variations: Property investors should consult their accountants regarding eligibility for a PAYG tax variation for their investment properties. This variation allows investors to adjust their tax withholdings throughout the year based on estimated taxable income from their investment properties.
Implementing a PAYG tax variation can enhance cash flow throughout the year, offering protection against interest rate increases and facilitating better financial management. By evenly distributing tax benefits throughout the year, landlords can improve their overall financial position.
Engage quantity surveyors for depreciation schedules: Engaging qualified quantity surveyors is a crucial step in accurately assessing and claiming depreciation on investment properties. These professionals specialize in identifying depreciable assets and determining their values.
By leveraging their expertise, landlords can maximize their tax deductions and generate substantial savings. Depreciation schedules provided by quantity surveyors are invaluable in claiming deductions over the property and its assets’ lifespan, resulting in significant financial benefits for investors.
Comprehend tax deductions: To optimize tax returns, property investors should familiarize themselves with the various tax deductions available to them. Deductible expenses can include property management fees, repairs and maintenance, insurance premiums, advertising costs, and more.
By having a comprehensive understanding of these deductions, landlords can strategically structure their expenses to maximize their tax benefits and improve their financial outcomes. Staying informed about changes in tax laws and seeking professional advice from accountants specializing in property investing can help investors navigate this complex landscape.
Distinguish repairs from improvements: Accurately distinguishing between repairs and improvements is crucial for proper accounting and tax compliance. Repairs entail expenses incurred to restore a property to its original condition, such as fixing a broken window or repairing plumbing issues. These repairs are generally tax-deductible in the year they occur.
Conversely, improvements enhance the value or extend the life of a property and may need to be depreciated over time. Property investors must collaborate closely with their accountants to correctly classify expenses and ensure compliance with tax regulations. Understanding this distinction empowers landlords to optimize their deductions and avoid potential issues during tax audits.
Plan for future maintenance: Proactive planning for property maintenance and repairs is essential for investors. By addressing potential issues in advance, landlords can minimize costs and preserve the value of their investments.
Allocating a portion of the tax return to a dedicated fund for future repairs is prudent. This approach allows investors to be prepared for unforeseen maintenance expenses, ensuring the long-term viability and profitability of their properties. By setting aside funds for future maintenance, landlords can mitigate financial strain and safeguard the condition and value of their property.
Seek professional advice: It is highly recommended to consult with property experts, accountants, and tax advisors specializing in property investing. These professionals possess in-depth knowledge and experience in navigating the complexities of property investment taxation. They can provide invaluable guidance tailored to individual investment strategies, assisting landlords in optimizing their financial outcomes and remaining compliant with tax laws. A tax accountant specializing in property investment can aid in structuring finances, identifying tax deductions, and exploring tax planning opportunities.