Learning to love tax time

The end of the financial year is a crucial time for Australians who own an investment property but few can say they completely understand the ins and outs of the tax system.

To help make the dreaded trip to the accountant a little easier – and perhaps a little more lucrative – the June issue of Australian Property Investor (API) magazine has published a special report detailing 20 little-known tips for property investors.

“It’s the time of year property investors either love or hate and for those who normally dread the end of the financial year, we’ve come up with a list of 20 not so common tax tips that might bring some financial relief,” said API editor Eynas Brodie.

Among the hints from API’s resident tax expert, Julia Hartman of BAN TACS, are:

• If you are considering doing repairs to your rental property, take care to make sure they’ll qualify for a full tax deduction. This will not be the case if you replace something in its entirety. For example, replace a worn fence a bit at a time over a few years rather than all at once.
  
• Consider prepaying the interest on the rental property loan up to 12 months in advance and get a tax deduction in the year it’s paid. Make sure your bank understands what you’re trying to achieve – simply depositing the amount into the loan account will not work.
  
• If you’ve made a capital gain on a rental property, you could salary-sacrifice your wages into superannuation through your employer and live off the proceeds of the capital gain.
  
• Before you go spending up big on your rental property thinking the ATO will be paying half, have a look at your tax bracket. This year you will have to have a taxable income in excess of $95,000 before you will be getting back 48.5 per cent of your expenditure. In 2007 you will need to have a taxable income in excess of $150,000, which is estimated to apply to only 2 per cent of the population.

“Some property investors make the mistake of spending money on their property without checking that they’re doing the right thing tax-wise and, of course, everyone’s situation is different so it’s important that people seek advice from their accountant,” said Brodie.