End of financial year, its taxation time! July 2006 RETURN
1.4 million Australian own an investment property and the large majority will have taxation implications to consider at June 30. To maximise the benefits of the investment landlords must be fully tax efficient. 1. Ownership structures should be considered. Buying personally, with your partner, trust or company etc need careful planning. 2. All allowable deductions against income should be claimed now & capital deductions recorded for use against any future capital gains. a). Cash expenses incurred in renting out the property may include council rates, loan interest, insurances, repairs & maintenance, agents fees, body corporate, protective clothing, motor vehicle costs, accountancy, general office expenses & utilities provided. b). Non cash deductions may include depreciation of part of the improvements. A range of items such as carpets, appliances etc can be written off over their life span as can the building structure & services themselves. These deductions can provide many thousands of dollars in refunds and be a huge help in funding the investment. The ATO may request a report from a qualified Quantity Surveyor to determine the amounts depreciated. c). Expenses incurred in buying, selling & making capital improvements such as extensions or structural landscaping should be noted as these can be used to offset any capital gains calculated if the property is eventually sold. 3. Any available taxation refunds should be sought and effected as often as possible. Many people claim their expenses in their annual taxation return and wait to receive a belated refund, sometimes 18 months after some expenses were incurred. Alternatively a PAYG Income Withholding Variation can be registered with the ATO and your projected refund can be available to you progressively as the expenses occur. This is done by your employer deducting a lessor amount of tax each pay. Lets say you would be eligible for a $5200 refund for the financial year, your employer may deduct $100 less from your weekly pay giving you the extra $100 in your pocket to help fund the investment. “Using the governments money up front to invest? Priceless!” NB. It is vital that expert advice is obtained for all the areas we have discussed. When you are in the most efficient position possible, you really can maximise your property returns.
1.4 million Australian own an investment property and the large majority will have taxation implications to consider at June 30. To maximise the benefits of the investment landlords must be fully tax efficient. 1. Ownership structures should be considered. Buying personally, with your partner, trust or company etc need careful planning. 2. All allowable deductions against income should be claimed now & capital deductions recorded for use against any future capital gains. a). Cash expenses incurred in renting out the property may include council rates, loan interest, insurances, repairs & maintenance, agents fees, body corporate, protective clothing, motor vehicle costs, accountancy, general office expenses & utilities provided. b). Non cash deductions may include depreciation of part of the improvements. A range of items such as carpets, appliances etc can be written off over their life span as can the building structure & services themselves. These deductions can provide many thousands of dollars in refunds and be a huge help in funding the investment. The ATO may request a report from a qualified Quantity Surveyor to determine the amounts depreciated. c). Expenses incurred in buying, selling & making capital improvements such as extensions or structural landscaping should be noted as these can be used to offset any capital gains calculated if the property is eventually sold. 3. Any available taxation refunds should be sought and effected as often as possible. Many people claim their expenses in their annual taxation return and wait to receive a belated refund, sometimes 18 months after some expenses were incurred. Alternatively a PAYG Income Withholding Variation can be registered with the ATO and your projected refund can be available to you progressively as the expenses occur. This is done by your employer deducting a lessor amount of tax each pay. Lets say you would be eligible for a $5200 refund for the financial year, your employer may deduct $100 less from your weekly pay giving you the extra $100 in your pocket to help fund the investment. “Using the governments money up front to invest? Priceless!” NB. It is vital that expert advice is obtained for all the areas we have discussed. When you are in the most efficient position possible, you really can maximise your property returns.