New Financial Year Strategy

As we are heading to the end of the financial year, this is a great time for property owners/investors to plan a year ahead. The end of financial year, also known as tax time, is a period when most of us are checking receipts, paperwork and emails to find out what we can claim as tax deductions to reduce tax payable.

During this time, there is a trend of retailers offering some great discounts on office equipments, taxpayers making donations to charity, some contributing extra to super to increase tax deductions.

For property investors, this is a great time to understand how their investment properties are performing, and what actions they can take for next year to reduce expenses.

Below are some tips that may help you with your strategy around your investment properties.

Understand Depreciation

Depreciation on the building and its fixtures on your investment property can significantly reduce your taxable income. If you have not yet, get a quantity surveyor to do a depreciation schedule to maximize your deductions. Depreciation schedule is a comprehensive report detailing depreciation deductions that property investors can claim over time.

Maximise deductions

Ensure you have records of all your rental expenses throughout the year so you can claim them as deductions. This includes things like repairs, property management fees, interest on your investment loan, insurance, strata/levy, council rates etc.

Interest rate on Investment loans

Most lenders will provide, or you should be able to download annual interest paid on your loans in mobile app or online banking. This FY interest rate has been more stable than previous FY, with cash rate only increasing once in Nov 2023. However, this FY most investors will likely to have most interest deductions compare to previous FY as interest rate on investment loans has been over 6% with most lenders throughout the year.

Seek professional help

A qualified accountant/tax agent can help you ensure you’re claiming all the deductions you’re entitled to and minimise your tax liability.

During tax time you tend to understand what your expenses are for your rental properties, and we suggest to our clients that this is a perfect opportunity to compare and review outgoings. Some suggestions are;

Review your loan: 

It may be a good time to review your investment loan and see if you can get a better deal on your loan/s. You could consider an interest-only loan to free up cash flow or look into an offset account to help manage your finances, or you may seek loan with Interest in advance.

Review your rent: 

Analyse current market trends and vacancy rates in your property location. Is it time to adjust your rent. Vacancy rates have been lowest in many locations and rents has been going up due to higher demand, are you getting market rent? Ensure you are charging a competitive rent.

Review your Insurance: 

Insurance is also ongoing expenses and premium may be going up each year. It is easy to compare insurance with most insurers providing online quote system, please check if you are paying competitive premium.

Review Property management fee: 

Research property management fee in the area to see if the fees you are getting charged is not too high. Negotiate the fee with the current property manager if your current fee is higher than competitors in the area.

Preventative maintenance: 

Regular maintenance can help avoid costly repairs down the track and improve the lifespan of your investment.

Quality tenants: 

A good property manager can help you find and screen quality tenants who will look after your property. Having quality tenants will help you reduce costs in unnecessary maintenance.

Purchase next property: 

We also notice that this may be a time for many people to buy their first investment property, or for investors to purchase their next property as they can understand their incoming and outgoings much better during this time.

Remember, the key is to be proactive, stay informed, and adapt your strategy as needed.

If you would like to discuss further regarding buying investment property and need assistance with loans and understand loan structures, please contact us and we can arrange a time to discuss.

** Please note that this information is general advice only and has not been prepared considering your specific financial situation, objectives, or needs. Before acting on any information, consider seeking professional financial advice to determine if it’s appropriate for you.**