Delay chasing tenants
In the final weeks before June 30, some landlords choose to wait until early the new financial year before chasing tenants for every cent of unpaid rent.
This is a standard tax-deferral strategy that may be particularly attractive if you expect topay tax at a lower rate next year.
“For once in a year, it might actually be beneficial if tenants pay their rent late,” says Eddie Chung, partner and propertytax specialist with accountants BDO in Brisbane.
However, property investors should not allow tax to dictate their investment decisions.
“You have to make sure that you get a commercial outcome,” Chung emphasises.
Sydney tax lawyer Robert Richards, principal of Robert Richards & Associates, adds that landlords should always be careful about letting a few weeks of unpaid rent turn into a bad debt.
And be warned, landlords won’t succeed in deferring their liability to pay tax by simply putting a rent cheque in a bottom drawer until July 1.
“You are deemed to have derived the rental income when you receive the cheque,” says Chung.
Similarly, if your property agent has collected rent but have not passed it to you until after June 30, you are still deemed to have derived the income in the current tax year.
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