Do you want to know how to save tax on an investment property? If you find it difficult to understand tax-related data or information, you may be missing out on a lot! Here’s a comprehensive guide for all of those who would definitely want to obtain tax deductions on their income. If you have been confused about what to do, this blog will help you put your worries to rest.
Capital Works Deductions
When you purchase a property, there are expenses that are a by-product of maintenance responsibilities. However, you can receive a deduction on renovation or structural improvement costs. You can claim capital works deduction by applying to the Australian Taxation Office (ATO). A standard error in judgment is claiming deductions on initial repairs. These repair costs are usually capital in nature and do not qualify for tax deductibility benefits. Capital works deduction claims are made for repair expenses over a period of 40 years. For further detailed information, you can visit the ATO’s official website.
Depreciating Assets
Although purchasing a depreciating asset is not applicable for a tax-deductible claim, it can qualify for a deduction over a while. Also, the more years you wait before making a claim, the depreciation costs become larger. This results in lower tax bills and taxable income. The ATO provides a depreciation pricing chart for transparency. However, you may calculate it yourself and claim the desired amount provided you can prove it and get it accepted. It is best to opt for expert advice to secure maximum tax benefits.
Interest Payments
You can avail of the 12-month rule opportunity to save up on tax on investment property. The rule allows taxpayers to prepay payments in order to receive an instant one-time tax deduction. If you had borrowed a fixed-rate loan, prepay your interests in the current fiscal year. This will let you claim a tax deduction in the next financial year when lodging the annual tax return report. Even certain service providers allow for a prepayment scope which can also aid in securing a discount. To know more about such tax deduction provisions, you can seek assistance from an expert property tax accountant or browse the ATO website.
Pay As You Go Withholding Variation
Do you have a negatively geared investment property? In simpler terms, it refers to a previously made property investment that is causing you a financial loss. In this case, it can be challenging to make ends meet. However, the PAYG Withholding Variation can help you sort this mess out effectively. Instead of receiving an enormous tax refund amount by the year-end, you can claim for a PAYG Withholding Variation. This means that your employer can withhold lesser taxes on your income and provide you with more cash. Thus, this strategy is beneficial to pay out debts immediately and create a financial balance.
Borrowing Costs
Another effective hack is to claim for borrowing expenses. This claim can be made on costs such as stamp duty on a mortgage, broker fees, mortgage insurance and a few others. One can avail of full deductions in the same year if the total deductible borrowing costs estimate to $100 or less. If you repay the loan before five years, you can claim for deductions in the same year. The deduction is calculated based on the balance amount of the borrowing costs.
Legislation Changes
Since the tax policies and concession provisions are subject to change almost every year, it is vital to stay updated. Being uninformed can disrupt your financial plans and strategies. The benefit you could avail of the preceding year may or may not be in effect the current year. If you are not updated, you may be unprepared, and this can cause you a lot of financial damage. Thus, consulting the ATO website before taking business decisions can help avoid confusions. Referring to the website from time to time can help you frame effective strategies. Make it a habit to never miss out on a new tax strategy!
Receipt Management
If you wish to claim deductions and enjoy tax benefits, your financial receipts must be in place. Since the ATO needs to inspect claims, receipts are required as evidence proof. To keep your financial records safe and recorded, you may hire a tax accountant. Accountants practice record-keeping for tracking financial transactions. Besides, the ATO makes it clear to have your receipts accurate and organized for claiming deductions. So, if you have just started on a business endeavor and were unknown to this, keep that receipt safe.
Cut down on CGT
Minimizing CGT is all about how to save tax on the sale of a property. You can keep an asset on hold for more than 12 months to avail a 50% discount on your Capital Gains Tax (CGT). You can also fully utilize CGT concessions if you are a small business owner. Taking advantage of such concessions can help you contribute the extra cash to your super fund to avail retirement benefits.
Hire an Expert Accountant
Hiring an experienced accountant can help you with accurate tax return reports, quick problem-solving and proper advice, contact Opulent Accountants today!
