Top Tax Tips for 2021
Top tips for a smooth tax time
It’s almost the end of another financial year, and that means tax time is coming. To make your tax time go smoothly and maximise your return, it’s important to get organised now to save any administrative headaches and get your tax return completed as soon as possible. In this article, we outline a few things you should do to get organised for tax time.
Double-check and declare all income
If you’ve had more than one lease throughout the financial year, or you’ve used your property for a short-term rental, you may have been receiving different rental incomes throughout the year. Make sure you keep detailed records of the income you receive from your investment properties. You could use bank statements, spreadsheets or accounting software to account for all income.
Keep all receipts and documents
When you spend money on your investment property, you should keep records throughout the financial year, so you’ve got everything you need at tax time. These records may include receipts for and documentation of the expenses. An easy way to keep your receipts organised is to take a photo or download the receipt (if it’s electronic) and save these to a folder on your computer. At tax time, all you’ll need to do is open this folder or send the files to your accountant if you have a professional complete your tax return.
Claim improvements and initial repairs as capital works
Any improvements or repairs made when you purchase an investment property must be claimed as capital works expenses. This means you can’t claim these expenses as deductions, and these need to be depreciated over several years. Your accountant can help you with putting together a schedule of how these expenses can be claimed.
Pre-pay your interest to reduce your marginal tax rate
If it’s looking like your income is about to end up in a higher tax bracket, and you have a fixed-rate loan, you can pre-pay your interest for the next 12 months. You’ll then be able to claim this as a deduction in this financial year to reduce your taxable income.
Work with a professional on your tax return
A great accountant knows how to maximise your deductions while remaining compliant with the Australian Taxation Office (ATO). If you haven’t already, look for an accountant who is used to working with property investors (most will be used to this), and enjoy the benefits of being proactive about tax time and getting the best possible return. Remember, any fees you pay to your accountant are a tax deduction too.
With everything you need to remember to get ready for tax time, it can all get a little overwhelming. If you’re unsure of what deductions you can and can’t claim, talk to an accountant to remain compliant with the ATO while maximising any potential refund.
Remember, this article does not constitute financial or legal advice. Please consult your professional financial and legal advisors before making any decisions for yourself.