A Landlord’s Guide To The EOFY

Author: Jennifer Hawke, May 20, 2021

With the End of Financial Year (EOFY) fast approaching it is a good time to review whether you are doing all you can to be tax-compliant but also whether there are any opportunities to increase investment property returns. While many of us don’t particularly enjoy tax time and look to outsource everything we can to an accountant, taking a proactive approach to your rental’s financials can make a big difference to your tax return.

Check out our tips below to help you to ensure you’re getting the most from your investment.

Invest in depreciation schedule!
Many landlords avoid learning about depreciation and their investment property however, investing in a depreciation schedule is an absolute no brainer. Depreciation is a key element of your investment property strategy. While depreciation tax breaks are higher on newer properties, they’re also available for older/existing properties.
As a property investor, you’re able to deduct the cost of the depreciation of your rental from your overall taxable income, incredibly, around 80% of investors don’t claim the depreciation of their investment property at tax time – which is crazy when it’s so simple to arrange and annual deductions are typically in the thousands of dollars every year, for up to 40 years. If you don’t have one for your rental property, contact your Let’s Rent property manager today and we will work with you to obtain one prior to the EOFY.

Invest in your investment… you heard me!
Savvy landlords understand that having an investment property isn’t a set-and-forget proposition. Investing in your investment property goes beyond addressing repairs and maintenance issues, it’s means identifying improvements that will appeal to a broad range of potential tenants, increase the weekly rent, and improve the overall value of your property. If you’re willing to invest but not sure how to maximise your “bang for buck”, our experienced property managers will be able to identify aspects of your property ripe for improvement, offering your asset wider tenant appeal and the potential to yield higher rental returns. Coinciding these investment property upgrades with tax time can add to your potential deductions for the tax year.

Pre-pay your interest
Subject to the conditions of your loan pre-paying interest for the year ahead may be an option for some landlords that can result in substantial savings, in particular if you have a fixed rate loan. The benefit of pre-paying the interest means you can push next financial year’s interest payments into this year and then claim it back as a deduction on your tax return for this year.
You will need to have the funds upfront, however this could potentially lead to a reduction in your taxable income. This is particularly beneficial if you are on a high income and have a large loan.

Review your rental property’s insurance
EOFY is a sensible time to review both your personal insurance and the insurance you hold for your investment property. The right insurance for your rental will depend on a number of factors, including whether your property is a standalone home or part of an owners corporation. If you’re part of an owners corporation, they’ll generally arrange for insurance to cover the building and common property – but you’ll need to take out your own insurance policy for items like floor coverings, appliances, window coverings, etc. When comparing insurers ensure you compare what the policy does and does not cover, a small saving now could cost you further down the road. Speak to your property manager to confirm your best approach regarding insurance.

Make sure your accountant knows property!
Property investment is a niche accounting category, and in order for you as a landlord to enjoy all the benefits investment offers, you need an accountant who knows how to treat your asset as a business! It’s in your interest to work with an accountant well-versed in the opportunities and risks that concern a property investor’s return. Your accountant should work with you to maximise the benefits you receive from your investment property. If they’re simply inputting the figures you provide regarding income and expenses, it could be time to look for a new provider. From both a compliance and financial perspective, a clued-up property expert accountant will help you get the most out of your investment property.

The Let’s Rent Team are available should you have any questions in regards to your investment property and maximising your tax return this EOFY!