The end of the financial year arrives the same way for most property investors every year. A message from the accountant, a scramble for receipts, and a return that reflects what was documented rather than what was actually available to claim.
Recent data from H&R Block found that four in ten property investors have missed a deduction in a previous tax return. In most cases it is not the basics. It is the more technical aspects of property taxation that go unclaimed. Depreciation schedules left outdated, borrowing expenses never captured, cost base adjustments overlooked until a sale has already settled.
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The gap between what investors are entitled to claim and what they actually claim is not a knowledge problem. It is a timing problem. The strategies exist. The window to act on them does not stay open indefinitely.
Here is what every investor should be across before June 30.
Prepay your loan interest now
The single largest deduction available to most investors is the ability to prepay interest on their investment loan for the following year.
If this has been a particularly high income year, or is likely to be higher than the next, it is worth asking the bank to prepay next year's interest now and claim the full deduction within the current financial year. The same logic applies to other claimable costs. Property management fees, council rates, and scheduled maintenance work can all be prepaid and brought into this year's return.
This is not a complicated strategy. What it requires is acting before June 30, not after.
Depreciation is the most underused lever in a residential portfolio
A quantity surveyor prepares the depreciation schedule. For a residential property the cost is typically a few hundred dollars. For a commercial asset, a few thousand. In both cases the cost of the report is generally tax deductible itself, and what it unlocks in legitimate deductions over the life of the asset far exceeds what it costs to produce.
If the property has had renovations, upgrades, or improvements completed this financial year, the existing schedule needs to be updated to reflect that. An outdated schedule does not simply miss new deductions. It can understate what an investor is entitled to claim altogether.
Super contributions can absorb a capital gain
For investors who have sold a property and realised a capital gain this financial year, there is a strategy worth understanding. Where concessional superannuation contribution caps have not been fully used over the past five years, it is possible to bring that unused amount forward in a single year and claim it as a tax deduction, including against the capital gain from the sale.
The critical point is timing. The sale needs to settle early enough to allow the proceeds to be contributed to super before June 30. If a property is being listed in May, that window has generally already closed for the current financial year.
Income protection premiums are frequently overlooked
Income protection insurance premiums paid from personal funds can be tax deductible. This is a detail that investors holding both a property portfolio and personal insurance regularly miss. It is worth confirming with an accountant whether this applies before the year ends.
Record keeping is not optional
H&R Block Director of Tax Communications Mark Chapman notes that many investors fail to keep adequate records of renovations and improvements over the years. The consequence of that becomes apparent at sale, when costs that could have reduced a capital gains tax liability cannot be substantiated.
The records worth maintaining on an ongoing basis include loan statements, tax invoices and receipts, bank statements, insurance documents, property management statements, depreciation schedules, and records showing periods when the property was rented or genuinely available for rent. These should be retained for a minimum of five years after lodging a tax return and considerably longer for documentation relating to a property's purchase and capital improvements.
The bigger picture
None of this is complicated in isolation. What changes the outcome is when the conversation happens.
Investors who engage with the right advisers before EOFY are simply better positioned than those who find out what was available to them after the fact. The strategies are there. The window is not unlimited.
Ready to make the most of this financial year?
The Rethink Wealth team is available for a complimentary consultation. Whether you are reviewing your current portfolio structure, updating your depreciation schedule, or planning a capital gain, the right conversation now can make a significant difference to your position before June 30.
Book your complimentary consultation today
Pat Casey is Managing Director of Rethink Wealth, part of the Rethink Group ecosystem.
This article was informed by reporting originally published in News.com.au. Read the original piece here.
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