The end of the financial year is approaching, and it is important to be prepared. This will ensure there are not any nasty surprises and as much cash as possible can be protected. Here are some tips to keep in mind:
1. Personal Expenses
Be careful to ensure that any interest on loans for investment purposes is separated from interest on borrowing of a personal nature. If a loan has a mixed purpose (Investment and Personal), it is difficult to determine how much interest to declare for each type of borrowing. Check with us if you have any concerns.
2. Substantiate your Claim
Keep all receipts to prove any deductions and be able to show why the expense was incurred to derive assessable income. Remember to keep them for five years.
3. SMSFs and Property
Consider moving Business Real Property into a SMSF. This is a long term wealth creation strategy and shouldn’t be rushed. If you have enough money in your SMSF, this could free up some cash before the end of the financial year.
4. Renovations by Previous Owner
If the renovations are identifiable and itemized in a depreciation schedule, they maybe are eligible for a depreciation deduction. The amount to claim will be based on the cost of the improvements less any depreciation already claimed by the previous owner.
5. Capital Gains Tax
Ensure the calculation of any capital gains on the sale of property is properly recorded. Purchase costs and selling expenses can be claimed against the selling price to calculate the capital gain. These costs and expenses must be documented and receipts must be kept for five year after the property has been sold..
6. Fixtures and Fittings
If fixtures and fitting cost less than $300, it may be possible to claim a tax deduction for the entire amount rather than a reduced amount using depreciation.
7. Carry Out Inspections
Carry out property and pest inspections and ensure any work required is completed before 30 June.
8. Use a Quantity Surveyor
There are benefits to having a depreciation schedule prepared by a qualified quantity surveyor. A quantity surveyor can determined the cost of construction and prepare a detailed deprecation schedule that will enable you to claim depreciation. Without their report you may not be able to claim depreciation.
9. Pre-Pay Interest
Depending on the lender, it is possible to pre-pay interest on your loan. This strategy is designed to reduce your taxable income in the current year. However, there are a number of important factors you must take in to consideration, your current cash flow; your taxable income this year and next year and whether your lender will allow the prepayment. If you think you could benefit from this strategy, call us to discuss your personal situation.
10. Repairs To Property
Although the cost of initial repairs made at the time of the purchase of the property are not deductible, expenses for repairs and maintenance further down the track are. The expense must relate to repair and maintenance and not a replacement. Expenses for replacements ie: a new kitchen, are depreciated and not claimed outright.