Five end-of-financial-year tax tips for property investors
Yet again the end of the financial year comes around, and it’s time to do your tax return or better – save on tax payable. Apart from the usual receipts and items claimable, for which I hope you have a more efficient system in place than the old shoe box, there are ways to save on your property investments and mortgages. Here are only a few tips on how and where you may be able to reduce your tax bill.
1) With four interest rate cuts since the beginning of the 2011-12 financial year, now may be the right time for you to consider refinancing your home. Do this before the end of the financial year, and the cost and saving could affect the tax payable.
2) When refinancing consider pooling personal and car loans into your mortgage as well as store cards and credit cards. This could further reduce your monthly outgoings for the year ahead.
3) Did you know that the interest paid on an investment loan is tax deductable? Add to this the depreciation of the property and its fittings, any repairs or maintenance you have undertaken, any management fees or rental losses, and it could make a considerable tax deduction.
4) Did you know that you can pre-pay your interest on your mortgage and in terms of investment properties? This would present a welcome reduction of tax payable. If you are paying off your business premises, the same strategy may apply.
5) Use debt recycling strategies, where as you use existing equity to purchase an investment property with an interest-only loan and pooling the majority of your cashflow through an offset account effectively reducing the interest payable. Such strategy will allow you to claim the investment interest against your tax bill, while also reducing your loan amount.
Obtaining sound financial, taxation and investment advice is highly recommended in order to implement the above strategies.
Robert Projeski is a leading property finance expert and the founder and managing director of Australian Mortgage Options. He has appeared on radio and TV and written extensively on property and finance matters.