Seven property essentials for the New Year

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Most property investors realise that the end of financial year brings with it a host of jobs, in order to prepare for tax time.  As the new financial year dawns, there are quite a few things that property investors and superannuation fund trustees alike can be doing to avoid the end of year rush next year, and to be in a better position when tax time arrives again.  Here are seven of them!

1. Start the year with a good quality, property tracking system. Instead of building up a shoebox of paperwork, which you ultimately dump on the desk of your accountant, why not start this next year the right way, and save yourself some accountancy fees at the same time?

A good tracking system will not only allow you to record all income and expenses on a property, but each time you add a new property, all the details for future capital gains taxes, losses and other tax issues can be recorded accurately.  Some systems also allow you to track the performance of your property, develop ongoing depreciation registers for when you add items to a property and basically minimise your accountancy costs while you maximise your tax return. www.destinylive.com.au has a tracking tool available to the public.

2. Get those depreciation reports done.  Depreciation claims can boost the amount of tax you get back or minimise the amount of tax you pay, where a property is positively geared. If you have never had one done, a depreciation report can allow you to make back claims up to two years in the past. If you buy a property early in the year, get in early and get your depreciation report done as soon as you settle. For those paying income tax weekly or fortnightly, this report can reduce your income tax if you submit a request to vary taxation, which includes all property income and outgoings and all depreciation. It doesn’t matter how old the property is, there is likely to be some depreciation available.

3. Consider any repairs and maintenance, which need to be done so that a maintenance plan can be established to cover the entire year. This way your cash flow can be better managed by attending to the most urgent repairs immediately, and spreading the rest out over the year.  Have your property manager do an inspection and provide you with a list of suggested repairs.

4. Revisit your loans and speak to your lender about the current interest rate on your investment loans. Few people negotiate this area well and I have, in the past, negotiated discounts of well over 1% off the current variable for most of my clients.  On a larger portfolio, a good interest rate discount can really boost your returns.

5. Make a decision early in the year about any properties which you might be thinking about selling and ascertain what the resulting capital gains tax might be. This is because if you are thinking of selling a property with a potential gain and one with a potential loss, you want to sell the one with the loss first.

Capital losses can be carried forward over future tax years to offset against future capital gains, but capital gains cannot be carried over and must have a loss elsewhere in the same year to be reduced. Those wishing to sell should have a carefully thought out and timed plan to do so.

6. Review your property manager.  Are they carrying out regular inspections, increasing your rents on a regular basis and staying in regular touch with you to report your property’s progress?  If not, then it’s time to consider a change.  A poorly performing property manager can have a big impact on the return on your investment.

7. Review the entire portfolio.  Some properties may have already had their best period of performance and it could be time to sell.  Others may not have performed as you had hoped and if there is no sign of a potential change, it could be time to cut your losses.  All portfolios should be reviewed every year to ensure that the properties within it are delivering a suitable return.

Properties which do not perform and which exist in areas where suitable growth drivers cannot be identified should be cut loose sooner rather than later, and a better performer chosen to replace it.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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