Category Archives: Tax deductions


Prepare your investment property to have a great 2019 financial year

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This month’s blog looks at how you can prepare your property to ensure that your important asset provides incredible results for the new financial year.

Manage your expenses

This is an area where cutting certain corners can be good for you. Start with your greatest expense, usually it’s your home loan repayment and see if your rate is competitive, a 50-basis point saving on a $500,000 loan is $2,500 your pocket annually but be wary of honeytrap rates that appear low but catch you with annual fees and other charges. Typically, you are stuck with your Council and Water Rates, however with the former you can contest the rates if for whatever reason they are not in line with market, and potentially reduce the overall cost.

Look at your insurance as well, the level of cover and excess can be tweaked to adjust your annual premium but remember to not be underfunded as a small saving in premium is not worth a large loss in a potential claim. Other areas such as management fees and accountant fees can also be considered, being competitive is important however a good property manager or accountant can save and return you money far greater than the fees you pay as we will discuss a little later.

Increase your income

Having your rent at or above market levels is critical to growing your investment portfolio, a good property manager can guide if you are unsure what that level should be. Maintaining and investing in your asset to an appropriate standard is also important, whilst spending more money may seem counterintuitive, a well-maintained property ensures that you can command a higher rent and hold onto good quality tenants saving you in the long run. Renovating is a crucial way to stay ahead of the game, we have blogged previously here and can show you examples of how a small to medium investment can yield impressive results in circa three years. Look at your home to see what low cost way that you can improve it, see if you can create an additional bedroom by simply putting up a wall or by getting rid of an unused spa bath. This will turbo charge your returns.

Utilise a property manager/professional

As mentioned earlier, a good property manager or accountant are critical to getting the best performance out of your asset. With regards to an accountant, knowing what can be claimed, asking you to obtain a tax depreciation schedule where applicable and pre-planning are all extremely important to ensure that you get a great tax return. And don’t despair if you think you may have missed something in the past, you can go back up to two years to claim what you may have missed. With regards to a tax depreciation schedule, a skilled quantity surveyor can ensure you don’t miss any deductible item and this can really add up over the long term. Some people consider who is the cheapest to be the main criteria when selecting a property manager, but there are a number of reasons why nearly every time this is not the best strategy.

First of all, no business owner will give great enough attention to their cheapest client and they certainly won’t put enough their resources towards them either. It means that you usually will get an under qualified agent who themselves will be underpaid and when an employee is undervalued and unappreciated the work suffers. Understanding marketing and leasing so that your asset gets leased quickly is also important, a one-week delay in leasing means that the cheapest agent is no longer the cheapest.

Quickly undertaking repairs so that they don’t cause further damage and therefore a greater repair cost, understanding how to spot issues before they occur is a very underrated skill that is the difference between a planned work or an after-hours emergency that escalates the cost. Knowing market rates for repairs, using skilled tradespeople who fix it right first time and the list goes on for why a great property manager is key to your assets performance.

Talk to us about your investment and how we can help your asset have its best performance this financial year.



Make money from renovating your investment in three years

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For this month’s blog we take a look at renovating your residential rental investment and what value and financial benefit that can bring you as an owner. Each example includes the cost of our project management fee as we managed each of the renovations of these assets.

We take three different properties in three different suburbs and understand: –

– what their previous rental amount was;

– what value was added and the cost of the renovation (including our project management fee);

– what the current rental rates are and;

– what the payback period is for investing in the renovation*.

Example 1 – Three bedroom home in the Altona area

Property was being leased at $1,434 before Tenants vacated and a renovation was completed. We managed the renovation that included installing a second hand near new kitchen, painting, lighting upgrade and tiling. Total investment towards repairs was $14,210 and the property was leased after one open at $1,695 per month. Annual rental improvement is $3,132 combined with $972 in tax savings in year one brings the total annual benefit to $4,104, the payback for this renovation is approximately 3.36 years*.

Example 2 – Two bedroom apartment in the South Yarra area

Property was originally vacant however a similar two bedroom apartment in the building was leased at $1,217 and was in better condition. We managed the renovation process which included new kitchen, painting and various other repairs. Total investment towards repairs was $11,405 and the property was then leased after one open at $1,477 per month. Annual rental improvement is $3,120 combined with $780 in tax savings in year one brings the total annual benefit to $3,900, making the payback period approximately 2.84 years*.

Example 3 – Three bedroom home in the Brunswick area

Property was being leased at $1,950 before Tenant vacated and we undertook a substantial renovation. We managed the renovation that included installing a new kitchen, painting, landscaping and new guttering. Total investment towards repairs was $19,800 and the property was leased after two opens at $2,390 per month. Annual rental improvement is $5,280 combined with $1,354 in tax savings in year one brings the total annual benefit to $7,931, making the payback period just under 3 years*.

*The payback period factors a modest $5 per week rent increase each year and the tax saving is calculated on you having one rental investment and being in the 38% tax bracket with an 18% reduction in tax savings each year, these figures are estimated and your individual tax situation may be different so please seek professional financial advice specific to you.

Our calculations do not factor the time saved in securing a new Tenant as new properties generally take a shorter time to lease, we have done this to roughly offset the time taken to renovate the property.

As you can see from the examples, it’s clear that by undertaking a renovation you will in a short time frame have your initial investment paid back whilst reaping the rewards of a significantly higher rental for the future. Not only do you get the higher rental to begin with, you typically gain a better quality Tenant and a lower amount of repairs being needed during the year.

Contact us should you be considering the need to renovate your investment and would like a chat on how we can help you make managing your investment much easier.





Getting ready for tax time

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We are almost there, 30 June is just around the corner and its time we get our tax return documents all sorted.

Some Real Estate agents give you a helping hand and send out an end of financial year statement detailing all the costs you have spent on your investment property so far. This is a really handy feature and will save you lots of time going through all your paperwork for the financial year.

If you don’t get an end of financial year statement here is a list of things you can claim, keep in mind some of these items wouldn’t always be on your end of financial year statement, for example your bank fees, so you might want to keep them all together.

  • Advertising for tenants
  • Bank charges and Interest
  • Body corporate fees and charges
  • Borrowing expenses
  • Capital works
  • Cleaning
  • Council Rates
  • Decline in value of depreciating assets
  • Gardening and lawn mowing
  • Insurance
  • Land tax
  • Legal expenses
  • Pest control
  • Phone
  • Property agent fees and commissions
  • Repairs and maintenance
  • Stationery and postage
  • Travel undertaken to inspect or maintain the property or to collect the rent
  • Water charges

For more Information on this topic visit to the ATO website

If you have any questions or want to find out more about how we can help save you time with your tax return please feel free to contact us.