Essential EOFY Tips for Investment Property Owners

Can you believe the end of the financial year (EOFY) is already here? If you’re an investment property owner, now is the time to take stock of your finances and make those strategic decisions for the next financial year.

In this post, we’ll give you valuable EOFY tips to help you maximise your returns and make informed decisions as an investment property owner.

Review Your Rental Income

If you haven’t already, take the time to evaluate your rental income. Does it align with the market rates for your area? Consider whether it’s appropriate to increase the rent for the upcoming year to reflect changes in the property market. Reviewing your rental income is crucial to ensure you maximise your returns and stay competitive in the market.

Depending on the type of rental agreement you have in place, there are restrictions on when and how often you can increase rent. For example, for agreements with a fixed term of 2 years or more, the rent can only be increased once in 12 months. If the agreement doesn’t specify a fixed term, or if the fixed term period of the tenancy agreement has ended, the same rule applies – rent can only be increased once in a 12-month period.

In addition, there are requirements on how you advise of rental increases. Be sure to check out fairtrading.nsw.gov.au for everything you need to know about increasing rent in your investment property in NSW.

Assess Property Expenses

Analyse your property expenses and identify areas where you can make savings. Review your insurance premiums, maintenance costs, property management fees, and other expenses associated with your investment property. Consider negotiating or shopping around with service providers or suppliers to obtain more favourable rates. By optimising your expenses, you can boost your overall returns.

Claim All Eligible Deductions

Familiarise yourself with the tax deductions you’re entitled to claim as an investment property owner. Expenses such as property insurance, property management fees, repairs, and maintenance costs are generally tax-deductible. Be careful, though; the ATO is particularly stringent when claiming for things that maintain the property verse something that improves it.

The Property Tax Specialists use the following example:

Fixing broken glass on a window is considered a repair. But, replacing the whole window frame is an improvement. 

The Property Tax Specialists

Only the cost of repairing the broken glass is likely to be classified as ‘repairs and maintenance’.

We always recommend consulting with a qualified accountant or tax professional to ensure you claim all eligible deductions and maximise your tax benefits for your investment property.

Depreciation Schedule

Depreciation is one of the most significant tax deductions an investment property owner can claim yearly! Engage a quantity surveyor to prepare a depreciation schedule for your investment property. What’s a depreciation schedule? Glad you asked!

A rental property depreciation schedule is a report that clearly calculates and details the tax deductions a property investor can claim for the annual depreciation of their investment property (building and assets, not land).

Source: https://www.capitalclaims.com.au/what-is-depreciation-schedule

Exciting stuff, right?! Depreciation allows you to claim deductions for the wear and tear of your property’s assets, such as appliances, carpets, and fixtures. A depreciation schedule can help you maximise your tax benefits and improve your cash flow.

Capital Improvements

If you’re reading this post – you should have already considered undertaking any necessary capital improvements before the end of the financial year. If you’ve missed the boat – take note for next year!

This could include extensions or improvements to a building, major renovations of a room, adding a fence, and structural improvements like driveways or a retaining wall.

We found this super handy resource to determine the difference between repairs, maintenance or capital works when making an investment property owner claim.

Check it out on ato.gov.au

Upgrading your property can increase its value and potentially attract higher rental income. Additionally, capital improvements made before the end of the financial year can be claimed as tax deductions in the current year.

Scrutinise Your Loan Structure

Review your existing loan structure and assess whether it aligns with your current financial goals. Consider consulting with a mortgage broker to explore refinancing options, potentially securing a better interest rate or more suitable loan features. Evaluating your loan structure can help you save money and optimise your cash flow.

Maintain Accurate Records

This one is important! Make sure your financial records are up to date and organised. Keep records of all income and expenses related to your investment property, including rental income, bills, and maintenance receipts.

Records must include the following details:

• Name of supplier
• Amount of the expense
• Nature of goods and services
• Date the expense was incurred
• Date of the document

Accurate and comprehensive records must be maintained for five years and are crucial for effective tax planning, and will streamline the preparation of your tax return.

Seek Professional Advice

If you’re unsure about any aspect of your investment property, seek professional advice. Accountants, financial advisors, and property experts will offer valuable insights tailored to your circumstances. Their expertise will help you make informed decisions about optimising your investment property strategy.

The end of the financial year is essential for investment property owners to evaluate their finances, look for ways to maximise returns and plan for the future. By reviewing rental income, assessing expenses, claiming eligible deductions, and seeking professional advice, you can maximise your investment property strategy and position yourself for success in the coming year. Stay proactive, organised, and informed to make the most of your investment property and secure a prosperous financial future.

Don’t forget – if you’re buying or selling an investment property in the Hunter Valley and surrounding area – we’re here to help! We can guide you through the process, and we’ll take care of all the ‘legal stuff’. And we’ve got a great extended network of accountants, financial advisors and other experts to tap into to help our clients on their investment property journey. Call us today on 02 4056 1070!