The end of the financial year (EOFY) on 30 June 2020 is fast approaching, which means it's time to do a little financial housekeeping. Whilst you get your affairs in order and prepare to lodge your taxes, consider these tax tips that can help you save money and streamline finances pertaining to your home or investment property holdings.
Claim applicable work-from-home deductions
The COVID-19 pandemic has turned many homeowners into work-from-homeowners. If you have been working from your place of residence since 1 March 2020, you may be eligible for work-from-home tax deductions this year.
Your electricity bill, phone and internet payments and home office cleaning expenses could be deducted from your overall tax obligation if you meet the criteria outlined by the Australian Taxation Office (ATO). Visit the ATO's website for specific instructions and guidance around which supplies, and utilities can and cannot be deducted.
Organise (and digitise) your records
Whether you're a landlord or a homeowner, chances are you will have piles of loose papers to wade through come tax time. One of the most helpful tax tips to adopt is to assemble and sort documents in a manner that makes lodging your taxes a breeze.
In addition to keeping hard copies of mortgage paperwork, lease agreements, rental income records, investment property expenses and other important items in physical folders, take it a step further by digitising these documents. Archiving property-related records in a cloud-based storage system with clearly labelled folders and file names will be beneficial at EOFY and in the years to come as you expand your portfolio.
Get a depreciation report for your investment property assets
The features of your rental properties regularly experience normal wear and tear, making them less valuable than they were when first purchased. You can claim depreciation deductions on newly purchased assets such as cabinetry and carpeting to reduce your tax liability. Use the ATO's depreciation and capital allowance tool to determine what deductions you're entitled to or, enlist the help of an accountant who can provide a detailed depreciation report.
Complete minor rental property repairs before EOFY
If your investment property will be needing any repairs or maintenance in the next few months, you can reduce this year's tax obligations by addressing those concerns prior to EOFY.
While this may not be a good time for major home renovations like replacing the timber flooring, any money spent on simple repair projects like replacing old gutters or having appliances serviced can be deducted from your taxes. Plus, it will ensure a more comfortable space and resilient structure for your tenants.
Prepay interest and expenses
If your investment portfolio is doing well, you may be able to reduce this year's tax liability and tick two more things off of next year's list by prepaying mortgage interest and other expenses related to the upkeep of your rental property. While these may not be tax tips everyone can afford to implement, it's certainly worth trying out if your budget permits.
Depending on your service provider, you may be able to pay annually for services such as landscape maintenance and insurances. And, if you have a fixed-rate loan, you may be able to pay down the interest that would accrue over the next financial year. Both strategies will result in another tax deduction before 30 June.
For further information about any matters concerning your investment property or property management, please contact your nearest Nelson Alexander office