How to maximise your tax benefits

How to maximise your tax benefits

For many property investors, ensuring the tax returns are in order isn’t quite their favourite way to spend their time. However, since property investment comes with several tax benefits, it’s important to invest time into understanding how the investment property can work with you in order to bring down your taxable income.

Given the intricacies of investment properties and tax benefits, working with a qualified and trustworthy accountant can make the world of difference when June 30th rolls around again.

Here’s our rundown on which areas are most important to discuss with your tax agent in order to maximise the value of your tax benefits on a yearly basis.

Depreciation Schedule

Depreciation schedules let the ATO know how much of your property can be written off on a yearly basis.

If your investment property is under 25 years old, you may be able to claim a tax deduction of 2.5% per year of the total cost of the original construction. This is applicable from the year of construction for up to 40 years.

Depreciation schedules can be the simplest way to understand how to claim the tax write-off of your building’s depreciation on a yearly basis, and are easily created by a qualified tax accountant.

If you’re unsure of the value of the original construction, you can work with a contractor to assess the build and confirm a depreciable original construction cost.


Income Tax Withholding Variation

For property investors who own a negatively geared investment property, you may be able to see less tax withheld from your pay (if you’re an employee) on a regular basis.

As your employer must withhold tax each paycheck to cover your estimated tax liability, you can benefit from improved cash-flow by offsetting the rental property loss of their investment property against their employment income.

By lodging a Pay As You Go Withholding Variation, your employer will be directed to send more cash your way each paycheck, as a result of withholding less tax from your pay. This can be of benefit to those who are looking to use more regular cash-flow capacity to cover bills, place into an offset account, or grow savings for a future investment.

For those who are managing multiple negatively geared investment properties, this strategy may be vital in ensuring payments are able to be met on a regular basis.

Other deductions

There’s a wide range of deductions claimable by property investors. These could include elements such as the cost of advertising for tenants, body corporate fees council rates, electricity and gas costs, maintenance costs, insurance, pest control, water charges, property manager fees, and more.

If you’re managing a portfolio of investment properties, work with a qualified tax accountant who can ensure you’re seeing every last dollar of your investments working as hard as they can for your benefit. The more you can reduce your taxable income, the more money remains in your pocket across the course of each financial year.

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