Amazing money saving tips that every rental property owner should know
1. Save tax by getting a Depreciation Report done by a quantity surveyor. The surveyor will visit your rental property and identify, measure and cost any depreciable items of plant and equipment. They will also identify whether the cost of constructing your house is eligible for a capital works write off. For newer homes, a depreciation report can result in an extra $5,000 – $10,000 in tax deductions in the first year alone. And just because your house is older it doesn’t mean it’s not worth getting one done! I often hear clients say that they have been told by other accountants it’s not worth obtaining a report if your house is old.
Check out BMT’s website for advice on Depreciation Reports. I have used BMT on a number of occasions to obtain Depreciation Reports, and I can’t recommend them enough. Not only are they good, but they offer a guarantee – they find double their fee in deductions in the first year, or you don’t get charged. With BMT, you really don’t have a lot to lose – old house or new house!
Note that if your surveyor finds you have not been claiming or maximising your entitlements, then your accountant can go back and amend your last 2 years tax returns.
2. Carry out your own repairs rather than hiring contractors. Not only will you save money, but the cost of traveling to the hardware store to buy tools and equipment as well as travel to your rental property to carry out the repairs will be tax deductible.
3. Manage your own property. Not only will managing your own property save on agent costs, but it will also allow you to increase the amount you can claim as a tax deduction for travel. When you manage your own property, you can claim a weekly trip to your rental property to collect the rent.
4. Normally assets costing more than $300 are not an outright tax deduction and will need to be depreciated over the life of the asset. However, if you have a rental property that is owned jointly with your spouse, then you can claim the cost of an asset up to $600 as an outright tax deduction. Make use of this by keeping an eye out for specials on things like new ovens, hot water systems, blinds and carpet. When possible, aim to pay no more than $600
5. Have you received a big bonus from your boss this year, or do you own a small business that for whatever reason is going to have a boomer year? If you’re expecting your income to be higher than normal, then consider bringing forward some rental property expenses to increase your negatively geared loss and offset some of that income. You can prepay up to 12 months in advance on rental property expenses such as mortgage interest, insurance and council rates, and claim it as a tax deduction in the year it’s paid.
6. Be organised and save money on accounting fees. Most accountants charge extra to prepare a rental property schedule for a client. How much extra will depend on the time taken to complete the tax return and the amount of receipts a client has in their shoe box. A rental property is no different to owning a small business – you need to be organised! There are software packages designed especially for landlords to record their income and expenditure. An excel spreadsheet is also an inexpensive idea and your accountant will love you for it. If you have a real estate agent that manages your property then make sure you get a 12 month summary from them before you visit your accountant. If your accountant has to add up each monthly rental statement, your accounting bill will go through the roof.
7. Have you had a rental property for a while? Are you really starting to struggle during the year when you keep putting your hand in your pocket to top up the mortgage, while patiently waiting for year end so you can receive a tax refund? Consider lodging a PAYG Withholding Variation with the Australian Taxation Office and receive your tax refund spread out in your weekly pay packet, rather than receiving it at the end of the year. You can lodge this variation yourself online through the Australian Taxation Office website, or your accountant will be able to do it for you.
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