When making investment decisions, taxation should be at the top of your check list to ensure investments are structured in the most tax effective manner. With this in mind, having a good understanding of the taxation consequences of owning your investments will ensure you don’t get caught off-guard with an unexpected tax bill or Audit investigation by the Australian Tax Office. Every Investor should have on hand an astute taxation advisor that can convert the taxation jargon into layman’s terms and provide the best guidance to ensure you optimise your taxation savings and minimise your taxation burdens.
Here Is What Other Property Investors Are Doing to Reduce Income Tax:
- Claiming initial repairs as capital works
- Claiming deductions for borrowing expenses and other blackhole expenditure that can be amortised over 5-years
- Keeping good records of all expenses for the property and ensuring all expenses are claimed as a tax deduction
- Pre-paying interest on their borrowings against the investment property
- Obtaining a depreciation report from a qualified quantity surveyor for eligible properties
- Holding investments for at least 12-months or more to access as a minimum, the 50% CGT discount for eligible entities when selling the property
- Delaying capital gains tax when selling properties near the end of the financial year by entering into contracts from 1 July
- Maximising depreciation by purchasing and installing ready for use new depreciating assets in July
- Applying for PAYG withholding variation for negatively geared properties to improve cash flow for employment income
- Self-assess the effective life of depreciating assets when you acquire them, this may give you an accelerated deduction compared to the ATO Commissioners prescribed depreciation rates
There have been many new developments in tax law recently for rental property investors and Commissioner of Taxation will continue issuing new determinations and rulings. It is critical that all investors have a good understanding of the taxation laws in Australia or engage a Registered Tax Agent to guide and advise you through its maze of income tax laws.
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Also, read How to overcome overdue tax returns?
