C&G’s Guide To Tax Time & Investment Properties

Tips & Advice

We’re nearly halfway through 2022, which means that tax time is right around the corner! The end of the financial year is an important time for property investors. What you claim on your investment property can be a key factor in whether you make a profit (otherwise known as positive and negative gearing), especially if you are a rental provider with multiple deductions available to you. The Australian Taxation Office (ATO) has stated they will be cracking down on some property-related expenses this year, which further highlights the importance of doing your research and seeking professional advice so that you can maximise your return.

What are the best ways for investors to make the most of their 2022 return and save this tax time? Here are C&G’s top five tips.

Keep a record of your expenses throughout the year

Property investors should think of their rental properties like a business. The main way to do this is to stay on top of your costs throughout the year so that there are no surprises waiting for you in July. It’s crucial to keep a record of all of your expenses, including maintenance and utility costs, body corporate fees, insurance, council rates and advertising costs - just to name a few! Without the proper documentation, you won’t be able to maximise your claim and could potentially lose thousands of dollars. If you’re unsure, we recommend contacting your Property Manager to obtain all of the necessary paperwork ahead of time.

Use the ATO’s tax-time toolkit for investors

With so much conflicting advice available online, it’s worth visiting the ATO website to catch up on the most up-to-date information on what investors can officially claim. The 2022 investor toolkit has been updated with an easy-to-follow checklist specific to rental properties, including common mistakes investors (and even some accountants!) make when filling out their return, and a step-by-step guide for accurately calculating your expenses. Reviewing these details can help you boost your claim while avoiding potential amendments from the ATO, which can be both time-consuming and costly. Not only is the toolkit a useful resource at tax-time, it’s great to keep on hand throughout the year to help you stay on top of your claimable expenses.

Prepay loan interest

If you are in a position to do so, paying your annual interest charges in advance can greatly boost your return as you will be able to claim that amount back from July 1st. This is particularly timely for current investors as interest rates continue to rise. Earning mortgage points (sometimes known as discount points, a loan discount, a loan origination fee or a maximum loan charge) are another type of prepaid loan interest that can help investors to save money by paying points upfront in exchange for a lower interest rate on their mortgage. Staying ahead of your interest charges allows investors to better manage their finances long term and potentially reduce the impact of future interest hikes.

Stick to a depreciation schedule

A Depreciation Schedule gives you a year-on-year figure that you can claim, which will not only help you to pay less tax but could potentially earn you thousands of dollars on your tax return! Your schedule also takes into account any changes over time to the property, including renovations and repairs. This cash-back boosting strategy allows investors to maximise their investment, and all it takes is a phone call to your accountant or trusted finance advisor. Read more about the advantages of a depreciation schedule on our previous blog.

Consider refinancing your loan

Paying off your loan faster is the smartest way to build wealth. Many Australians have turned to refinancing as a way of responding to the recent interest rate hike, but it isn’t as well known that refinancing has the potential to boost your tax return. Using this tax time to dig deep into your finances and determine whether renegotiating with your current lender or making the switch could save you thousands of dollars on your mortgage just by claiming back your refinancing costs, including loan application fees, legal fees, lenders mortgage insurance, stamp duty and loan registration costs (or any exit fees and penalties.) Be sure to speak with your account or financial advisor before refinancing your loan to make sure it is the best pathway forward for your current situation.

Tax deductions vary from property to property, so be sure to speak to a trusted finance expert ahead of lodging your return. Don’t hesitate to contact Chisholm & Gamon if you require more about your investment property!