In this video, Full Financial Services General Manager Paul Cronk outlines five ways property investors can streamline their taxes and get more bang for their buck.
Between them, property investors receive billions of dollars in tax deductions each year. With the right tax knowledge, you can decrease your financial burden and make the most of your investments. Let’s take a look at five tax tips for first-time investors.
Number One: Use a Depreciation Schedule
For investment properties built after July 1985, depreciation schedules can reduce your taxes. You’ll have to hire a quantity surveyor, but most investors recoup the surveyor’s fee in their first tax return. These depreciation deductions can save you thousands of dollars every year.
Number Two: Keep Your Receipts
Keeping receipts may seem like an obvious practice, but each year the ATO contacts thousands of taxpayers to inspect their claims. If you don’t have the correct receipts, you can’t receive deductions for your rental expenses.
Number Three: Use Gearing
Gearing is the practice of borrowing money to invest, and it can help you save money on your taxes. You can claim a tax deduction for interest and investment costs, and these deductions often reduce your overall taxes on other income.
Number Four: Plan Your Sale to Minimise Capital Gains Tax
If you hold onto your investment property for more than 12 months, you can reduce capital gains tax by half. Therefore, if you’re planning on selling soon, make sure you hang onto your property long enough to pass the 12-month mark. Also, if you exchange contracts after 1 July, you can defer tax for another year. This can be an effective tax strategy for your cash flow.
Number Five: Get Personalised Advice
Taxes can be complicated, which is why it’s so important to get personalised advice for your own situation. Your investment property can help you to build your wealth, but you need to structure your taxes well to realise these benefits. For more information on getting started with property investing, get in touch with us today.