In the lead up to the end of the financial year (EOFY), it’s a great opportunity for property investors to pause, prepare their records, and make sure they’re making the most of what they can claim. Tax time might not be the most exciting part of investing, but a little preparation now can make a big difference.
Here’s what to keep in mind as 30 June approaches.
What you can and cannot claim
Property investment comes with a range of expenses, and there are some that can be tax deductible. These generally fall into two broad categories: things you can claim right away, and things you can claim over time.
Immediate deductions often include things like interest on your investment loan, council rates, property management fees, advertising for tenants, and basic repairs or maintenance work. If you’ve paid premiums for landlord insurance, those can typically be claimed too.
Then there’s depreciation—this applies to the wear and tear on both the building itself (if it was built after July 1985) and certain items within the property, like appliances, carpets, or blinds. If you haven’t already, getting a depreciation schedule from a qualified quantity surveyor can be a smart move. It helps make sure you’re not leaving money on the table and the cost of preparing the report can also be claimed.
Keep in mind: rules around what you can and can’t claim—especially for second-hand items—have changed in recent years. So, if you bought your property after May 2017, it’s worth double-checking the latest rules with your accountant before you make any claims.
Timing can make a difference
As EOFY approaches, it’s worth thinking about the timing of your expenses. For example, if you’ve got maintenance work coming up, insurance premiums or interest payments due, bringing them forward into this financial year could help reduce your taxable income.
Some investors also look at prepaying interest on their investment loans, depending on what their lender allows. It won’t be the right strategy for everyone, but it’s something to consider if you’re aiming to bring forward deductions.
Capital gains tax considerations
If you’ve sold an investment property during the year, you’ll also want to be across how Capital Gains Tax (CGT) applies. The timing of the sale, how long you’ve owned the property, and whether it was your primary residence at any point, all play into how much CGT you may pay.
Consider any available exemptions or discounts, such as the 50 per cent discount for assets held longer than 12 months. If you have any underperforming properties, selling them to realise a capital loss can offset your gains and reduce your CGT liability.
Keeping your records in order and avoiding errors
EOFY is also the time to make sure all your records are in order—receipts, loan statements, rental income summaries, and anything related to expenses. Staying organised means fewer headaches at tax time and makes life easier if the ATO ever comes knocking with questions.
According to the Tax Office, results from property data matching found a number of common errors. This included the reporting of net rent instead of gross rental income that results in the same expenses being claimed a second time. Properties are being omitted from returns and properties owned by multiple stakeholders are only having one of the stakeholders reporting the property, when all property owners are required to include this information when lodging their tax return.
Capital works or depreciating assets are also being commonly claimed as repairs and maintenance when they shouldn’t be, according to the ATO. For example, if you are renovating a bathroom, there are rules around what can and cannot be considered ‘a repair’, so you need to understand and distinguish each deduction in order to correctly lodge your tax return.
The big picture
EOFY can also be a good time to take a step back and review how your property (or portfolio) is performing overall. Are you charging rent in line with the market? Are your expenses creeping up? Are you getting the most from your current loan structure?
Review the structure of your property investments. Holding properties in tax-effective structures such as trusts or self-managed superannuation funds (SMSFs) can provide tax advantages, but you’ll need to get expert advice and weigh up the advantages and disadvantages and how this could affect your overall strategy.
Expert advice goes a long way
While it’s tempting to go it alone, property and tax can get complicated—especially with ongoing changes to legislation and what the ATO considers fair game. So, make sure you are getting the right advice to ensure you are claiming everything you’re entitled to and staying compliant with the latest regulations.
Getting on top of your property tax planning in the lead up to 30 June doesn’t just help you at tax time—it sets you up for stronger returns in the year ahead. With a bit of preparation (and a trusted advisor in your corner), you can finish the financial year feeling confident and in control.
Checklist for property investors at tax time
Conduct a thorough property review
Maximise tax deductions
Interest on loans
Property management fees
Strata Levies
Maintenance and repairs
Prepay certain expenses
Write off bad debts
Plan for Capital Gains Tax (CGT)
Reduce your CGT liability.
Utilise tax-effective structures
Claim depreciation deductions
Plan for the future
