Investing in property is a smart way to secure your financial health in the future. Not only does it generate an additional income stream for the household, there are also expenses to hold the property, which in Australia helps us to save tax! These deductions can amount to tens of thousands of dollars in savings every year and help maximise your return.
Here is a list of the top 5 tax deductions that you should take advantage of this upcoming end of financial year;
1. Interest Loans
Easily the highest cost on your investment property are the loans you have taken out to buy it. The interest on your loan is tax deductible if you took out the loan to:
– purchase a rental property, or the land on which to build one
– purchase a depreciating asset for the rental property
– make repairs to, or some renovations on, the rental property
2. Insurance policy deductions
One of the surest ways to reduce risk and secure your financial health is to have insurance for those exceptional circumstances where things can go wrong. Landlord Insurance or Body Corporate contributions are tax deductible.
3. Property management costs
From the fees and commission of your property agent, to the advertising costs for tenants, and even the legal fees associated with protecting your interests (such as evicting a non-paying tenant, or defending a claim of damage against your property by a tenant), these are all immediately deductible.
4. Council rates and water charges
These are both deductible in the same financial year in which you incur them. Depending on your state and council, this easy-to-overlook deduction could save you thousands in rates and charges over the years.
5. Maintenance and repairs
These both provide an immediately tax deductible way to keep your rental property up to scratch. The most important thing to be aware of is the difference between repairs and maintenance, and renovations, which can become an expensive misunderstanding. The general rule is that if you already have a tenant in the property, or are in-between tenants, and there is wear and tear, you are within your rights to mend these and have it deducted.
Possible reasons to refinance
All of these available tax deductions make investing in property a smart choice, but they aren’t the only way to secure your financial health. Refinancing could also help minimise the costs of investing in the long run. Here at LiveWell, we want to ensure that your mortgage repayments are manageable. We aim for a maximum of 30% of your gross income and provide input to help you secure the best possible interest rates.
How LiveWell can help
If you’re serious about your financial future and want to tackle loan structuring and other financial strategies head-on, we can guide you on how to work with advisers, accountants, insurance professionals, property management, and contractors. We believe in connecting good people to the best in the business, and we do this free of charge.
We understand that most people don’t have the time between work and family to sit down and figure it all out. Schedule a consultation, during which we can determine your needs, walk you through how to reduce the risk of investing, and how to fast-track your position on the property ladder.
Whether you have begun investing, or are looking to start, do our free 10-point financial health check first to see how you’re tracking. Then, get in touch to set up an appointment for pre-financial year planning to minimise your tax position and maximise the legitimate deductions you can make to keep your returns up-to-date.