With the end of the financial year fast approaching, now is the best time to assess your current financial position and resource requirements to take advantage of any tax deductions you are entitled to.
As a landlord, individual or business, there are many incentives available, and June is the best month of the year to make sure you have dotted your i’s, and crossed your t’s, to avoid missing out.
Deductions for landlords
All property related expenditure paid before 30th June is eligible as a deduction against the rental income for the current financial year. To maximise your deductions as an investor, you should consider the following:
- Arrange and pay for any repairs required to maintain your property in a rentable condition
- Check that your landlord and building insurance policies are up to date and paid for in full
- If your property was built after 1985, obtain a deprecation schedule from a quantity surveyor to ensure you receive the maximum deductions available for your property
- Collate and claim all property related expenses including, property management fees, advertising for tenants and Council and water rates (if not paid for by the tenant)
Deductions for individuals
As an individual, you can maximise your deductions before the end of the financial year through the following purchases and/or expenses:
- New equipment required for work purposes, such as tools, mobile phones, computers, laptops or other electronic devices
- Professional membership fees to associations required for work purposes
- Essential uniform items as required for your specific occupation
- Insurance policies such as professional indemnity insurance and income protection policy paid before 30th June
- Generous donations to eligible charities
It is important to note that only the portion of above expense used for work purposes are eligible for a deduction. Private use must be excluded from any claim.
If you have not met the current threshold of $25,000 p.a you should consider topping up your super.
- This amount includes any required contribution made by your employer, so be sure to only pay the correct top-up amount as any excess over the threshold will not be allowed as a tax deduction
- To claim a deduction for the year ending 30th June, all contributions must be received by the super fund before that date
- Timing of these payments is critical as payments that leave the payer's bank account on 30th June but are not received by the fund until 1st July will not qualify as a deduction in the current year
Deductions for Small Business Entity (SBE)
As an SBE (generally defined as an entity with a business turnover less than $2,000,000 p.a.), you can access a number of tax incentives not ordinarily available to larger businesses. As an SBE, make sure you consider the following incentives to maximise your deductions:
Immediate asset write-off of assets up to the value $30,000, excluding GST:
- Qualifying assets must be purchased after 2nd April 2019 and can be claimed as a 100% deduction in the business 2019 tax return
- Assets purchased between 29th Jan and 2nd April 2019, have a threshold of $25,000 to qualify for the immediate write-off
- Assets purchased from 1st July 2018 to 28th January 2019, have a threshold of $20,000 to qualify for the immediate write-off
Prepaid expenses can be brought forward 12 months:
- If expenses such as insurance are paid in advance, the business can claim the cost in full for the 2019 financial year
Accrue expenses such as:
- Directors’ fees
- Employee commission
- Bonuses and other entitlements.
Note these payments only qualify for a tax deduction where the employer is committed to making payment in the next financial year.
- SBE’s conducting business can claim the start-up costs as an immediate write-off in the first year, as opposed to deferring the claim over a 5-year period under the black whole expense provision
- Consider valuing trading stock at either Cost, Market Value or Replacement value - selecting the option which represents the lowest value can reduce an entity’s taxable income
Weighing up your options
While maximising your deductions come tax time is a great way to increase your bottom line, cashflow is always a crucial consideration whether you are a landlord, individual or business. It is not always advisable to spend money for the sake of gaining a deduction, therefore it is imperative that you consult with your accountant before proceeding along these lines.