It’s widely agreed that one of the benefits of investing in a Hamilton property is the tax relief the investor cain achieve.
So, given tax time is just around the corner, it’s important to make sure you know what you are entitled to, and the deductions available to you as a property investor – either now (with your current investment/s) or in the future, when you finally do begin climbing that property investment ladder.
Below, we outline some tips that could help you maximise the tax benefits of investing in property.
Depreciation – claim it!
Property depreciation is a tax break that allows investors to offset their investment property’s decline in value from their taxable income – and its one of the major tax benefits a property investor can claim.
It occurs when an item’s worth becomes less over time, and is a way to allocate the cost of an item over its useful life.
Where it can apply to your investment property is for items like, for example, an oven: if the oven is valued at $1000, and has a 10 year life, you are able to claim $100 against your taxable income for 10 years on the oven.
It doesn’t apply to everything in your investment property, though! You’re only able to claim depreciation on certain items.
There’s two types of depreciation tax deductions that you can claim:
- Depreciation on plant & equipment: this refers to items within the building like ovens, hot water heaters, air conditioners, carpets, blinds and light fittings.
- Depreciation on buildings or ‘building allowance’: this refers to the construction costs of the building itself, such as concrete and brickwork.
To make a tax claim for depreciation, you need a report that identifies what may be claimed against your tax and the current value of each item – it’s what’s known as a depreciation schedule.
An important point to note is you CAN NOT create this depreciation schedule yourself – only a qualified quantity surveyor can undertake this inspection and identify what can be claimed, AND the valuation of the items.
There’s an upside though; the cost of getting a quantity surveyor to prepare the depreciation schedule is also tax deductible!
Property maintenance – spend now, claim now (or pretty soon after)
Property maintenance is a reality of property ownership. And if you time that maintenance to happen in June, you can avoid being out of pocket for the expense for too long.
Maintenance can include:
- Servicing of your property’s smoke detectors
- A visit by the pest control company
- Gardening services, including lawn mowing costs
- Checking of gas and hot water systems
Repairs, maintenance and service costs for these kinds of updates to an investment property are likely to be tax deductible for most property investors – so taking care of them in the next couple of weeks mean you’ll be able to claim on them in July, when you get your tax done.
Recoup other expenses
Tax time is also when you can claim the other necessary expenses of investment property ownership; land tax, council and water rates, fees to manage the property, any advertising you’ve paid to attract tenants, body corporate fees – these are all tax-deductible expenses.
Travel to inspect your investment property might also be an option – but you will need a log book and relevant receipts to claim this.
Finance and insurance costs can also be claimed
Generally speaking, you are allowed to claim all finance costs associated with your property investment, including bank fees and charges, borrowing costs and interest on your loans.
All insurance costs for your investment property are also tax deductible.
Professional advice can make a huge difference
Remember, if you’re a property investor or are considering investing in property soon, we’re here to help you get your finances right.
With tax and financial planning specialists on-hand, Sinclair Wilson can help you access a loan structure that’s right for your ongoing investment strategy and help you access the most competitive rate available, that best-suits your personal financial circumstances and goals.
We can also work with you to ensure that at tax time, your investment in a property works for you as you’d hoped. Give us a call today.
