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June 30 is less than a month away, and savvy investors should start thinking about the sorts of tax deductions they can get. Some things may require several weeks of planning, and if you miss the June 30 cut-off you won’t be able to book a tax deduction this year.
Those deductions can wipe out much of the tax payable on rental income they receive, or deliver negative gearing benefits.
Some deductible expenses — such as interest on investment loans — are paid every fortnight or month, but there are others where good timing can deliver handy cash windfall.
Here are four:
1. Bringing forward any looming maintenance or repairs can be helpful. If it has to be done, you may as well get the deduction in the next few months rather than later next year. However, be aware that the Australian Taxation Office has rules about what can be deducted immediately and what has to be written off over several years.
2. Insurance premiums for a landlord insurance policy can usually be prepaid, but make sure it works for you from a cash flow perspective.
3. Depreciation of fixtures, fittings and the building cost is a delightful deduction because it doesn’t take cash from your pocket. Think seriously about getting a depreciation schedule from a professional quantity surveyor. It costs about $600-$700 but is tax deductible itself and will uncover deductions you never thought existed.
4. Prepaying interest can be an option where an investor is seeking a bigger tax deduction this year — perhaps to offset a large capital gain elsewhere. Lenders let you pay a year’s interest on your investment loan in advance, meaning you effectively pay two years of interest in the current financial year. However, remember that unless you keep prepaying, there could be tax ramifications next financial year.