KEEP CALM – WE’VE GOT YOUR TAX TIME TIPS
KEEP CALM – WE’VE GOT YOUR TAX TIME TIPS
The words tax & calm don’t really go together unless of course you’re super prepared. Almost 50% of landlords miss out on potentially thousands of $$$’s by failing to claim depreciation on their investment properties. We’ve popped together some helpful & handy tips to help you to KEEP CALM this tax time of year….
Most of us pay too much tax. Why? Because the tax system is so complex we don’t know what we can claim and how to claim it, so, grab a chamomile tea & jots down these tips:
1. Get the facts
Regular & concise info is imperative to the smooth management of your investment property, particularly during the leasing process. A good property manager (like the one’s you’ll find here!) should provide you with detailed reports about the performance of your property. To that end, annual income & expenditure statements should be provided along with monthly rental statements.
2. Prepay expenses
In most cases for investors, the best way for to boost your property investment refund is to pay for any expenses before June 30 – that way you can claim these expenses as a tax deduction in the 2012 financial year. Typical expenses include rates, body corporate fees, borrowing costs, property management costs & insurance. If you have a high income you may even consider bringing forward required spending such as repairs. This can help you to reduce your overall tax bill.
3. Know your personal tax position
Before you lodge any expenses it’s important that you consider your tax position carefully. For example, if you have multiple investment properties that are negatively geared (the rental income is less than the expenses of the property), the negative amount could be offset against other income including salary.
4. Obtain a quantity surveyor’s report
Deprecation refers to a value assigned to the wear & tear of a property of equipment. You can claim a tax deduction for wear & tear without spending any additional money. To ensure you get the maximum deduction commission a quantity surveyor’s report on your investment property.
5. Pay up superannuation
If you are self-employed or employed by your own company, paying into your superannuation before the end of the financial year can be an effective way to minimise tax.
6. Cash is king
Lodging your tax as early as possible will help ensure your receive your refund sooner, therefore resulting in a boost to your cash flow.
7. Engage an expert
To get the most out of your return we recommend investing in an accountant who specialises in property investment.
8. Plan for the year ahead
Now you have done all the hard work why not take the time to sit down with a property advisor & plan the year ahead. Are there opportunities to build your portfolio? Could a renovation help you achieve a higher rental income?
& here are some tips for those of you that may or may not own an investment property & just want some straightforward tax tips…..
1. Get organised
When you sit down to complete your tax return have all the necessary information at hand. This is especially important if you are using an accountant, so your visits are time & cost-effective.
Gather together group certificates, bank & dividend statements, investment property accounts, receipts for work-related expenses, any travel logs & your health fund details if you plan to claim the private health insurance rebate.
Don’t chuck this stuff out after you’ve lodged your return. Keep it organised in a folder for 5 years in case you’re ever audited.
2. Chase receipts
If you have misplaced receipts for deductible expenses track them down, they can really add up. If you know where you spent the money go back to whoever you paid & see if they can provide a copy of the receipt or invoice. Bank & credit card statements showing details of purchases can now be used in some cases. Where travel expenses are concerned, an itinerary will do if it shows places, nature of work activities as well as dates, times & durations.
3. Claim work-related expenses
Many people have to buy specific things to carry out their job. The cost of these items can be claimed against tax & are called work-related expenses. Call the tax office, or check their website ato.gov.au, for a list of acceptable work-related expenses for your job.
If you have an office in your home, and it’s your principal place of work, you can claim part of the expenses of occupying your home. That includes rent, interest on your mortgage, land tax & home insurance. You’ll also be able to claim a percentage of running expenses such as phone, heating & electricity bills.
4. Declare all interest income
Financial institutions provide the tax office with details of all interest paid to customers on all accounts. The Tax Office then compares those amounts with what you’ve declared in your tax return. So make sure you list interest from every account you hold. Don’t think the taxman will miss a couple… it won’t.
5. Don’t forget your dividend tax credits
A lot of our big companies listed on the stock market pay dividends to their shareholders. Dividends are basically a slice of the profits.
Because many of these companies pay tax at the full corporate rate, the dividends are paid to shareholders along with a 30 % tax credit. So if your personal tax rate is 30 cents in the dollar or less, the dividend income from these shares is tax-free.
6. Offset capital gains with losses
Profits on selling shares or investment properties purchased after 1985 will be charged capital gains tax at half your marginal tax rate. But any losses made on these types of investments can be offset against profits.
So if you have made a big profit on one investment, consider selling some of your disasters…like shares that haven’t performed. The losses made on these investments will offset the profits made on the winners & will cut your capital gains tax bill.
7. Claim all costs associated with doing your tax
More & more people are using tax agents to prepare their tax return. All tax agents’ fees are deductible expenses as well as the associated costs. That means travel to & from the tax agent’s office, the cost of phone calls & faxes.
Any costs borne by taxpayers when the tax office decides to audit you are also deductible.
8. Delay income until next financial year
Delay receiving income until next financial if you’re likely to earn less in 2008-09, and will be on a lower marginal rate, or want to take advantage of the projected income tax cuts.
See if you can receive interest on savings next financial year. If you have your own business you may want to hold off invoicing your clients until July.
9. Pay off debts
It’s silly to invest spare cash, & pay tax on the returns, when at the same time you are paying interest on loans. Think about it. If you have a credit card debt or personal loan, you may be paying out interest of up to 20 %. Invest any spare cash & the best you could do is 8 % and then tax is taken out. By using that spare cash to pay off debts you are saving yourself from forking out interest & paying extra tax.
10. Split your income
It’s easy and perfectly legal. Put all the bank accounts & other income producing investments in the name of the spouse in the lower income tax bracket. Interest on savings accounts & fixed interest are taxed at the same marginal rate as the account holder.
Income splitting is very attractive in a family where there is one primary income earner because the other spouse can earn up to $6,000 tax free.
Remember to keep calmmmmmmmmmmmmmmmmmmmmmmmm….