If you’ve got a real estate investment then you want to make sure you’re doing the right thing when it comes to lodging your tax return. With the end of the financial year upon us it is a fitting time to review some of the ATO’s major do’s and don’ts for claiming rental property deductions.  

 

1 – DO Keep good records to claim your rental property deductions.  

Your most important DO is to keep your records. Without receipts and supporting evidence to make your claims you can find yourself in hot water in the event of an ATO audit. With the ATO continuing to set their sights on the high claims being made for rental properties, keeping good records enables you to maximise your claims within the law.  

 

2 – DON’T claim for personal use of real estate property. 

One of the biggest blunders that people make when making claims for their rental property is claiming 100% of their costs, even when the property isn’t 100% used as a rental property. This often happens with short-term rentals that are also used as a personal holiday house, or where an owner or a family member lives in the property for part of the year.  

The mortgage is one area that can be a particular mine field. Just because the mortgage is held against a rental property, this doesn’t mean that it is automatically deductible. What matters is what the money from the mortgage was used for. This means if the mortgage was used for mixed purposes you must apportion it. If you later redraw from the mortgage for personal purposes this will also mean you need to apportion the interest expense for personal use. When use becomes so mixed as to make it impossible to determine how much of the mortgage actually relates to the rental, the ATO can even deny a deduction in full. 

3 – DO keep proper records for Capital Works and Capital Allowances deductions.  

If you purchase an asset (such as a stove or curtains) for your rental property, these costs are not immediately deductible. Normally these are claimed as capital allowances, or more commonly known as depreciation, over the life of the asset.  

 Previously when you purchased a rental property you would pay for a Quantity Surveyor’s report. This report outlines capital works (claiming some of the costs of building the house) and capital allowances deductions that you can claim on the assets that come with you purchase of a property. HOWEVER some very big changes came into place from the first of July 2017 regarding second hand assets. These laws mean that property investors, other than businesses carrying on a business of property investing, or excluded entities, can only claim depreciation on brand new assets that are immediately used for the investment property. This means no more depreciation is allowed on the acquisition of second hand assets, or for new assets that are initially used for private purposes. A Quantity Surveyor will still be to provide any capital works claims (if the building meets the requirements for these).  

 

4 – DON’T claim for travel costs to get to and from your rental property.  

There was a time that you could claim for travel to inspect or make repairs to your rental property. However with people claiming thousands of dollars to drive long distances or even fly to their properties the ATO changed the law so that from July 1 2017 no travel costs were deductible anymore (other than those incurred and claimed by a real estate agent acting on your behalf). Even though the new law has been in place for a full financial year already, it was amongst one of the most common mistakes made in 2018 tax returns.  

 

5 – DO Speak to a qualified tax agent about your particular rental property investment circumstances. 
We’ve only touched on some of the major concerns when it comes to claiming deductions for rental properties. Even within these concerns there are a number of issues that can impact your specific situation. That’s why it’s best to check with your tax agent rather than lodging claims for yourself. Make sure you tax agent is up to date with real estate property laws so they can maximise your deductions without making ineligible claims.  

 

* A qualified Tax Agent can save you time and money, but you should still do your own research.  Please note that Zac McHardy is not giving any legal or financial advice *

It would be nice to be able to grow money in order to pay off your home loan sooner. After all, it is one of the biggest, if not the biggest, debts you will ever have. With a 25 to 30 year repayment term it is literally a lifetime of payments. Paying it off sooner is not a big secret. It’s about getting those extra dollars onto the loan sooner rather than later. Here’s a few tips on how to eat away at that debt just a little bit faster.   

 

1 – Add extra cash to the stash. With interest rates going down at the moment a super simple way to eat at that mortgage faster is just to keep your repayment amounts the same. As minimum rates drop you’ll find yourself paying that little bit extra. Even better, if you can add even an extra $50 with each repayment you can wipe years off your loan in the long term.  

 

2 – Chat with your mortgage provider.  Your mortgage provider wants to keep you with them. Most providers will give you a decent mortgage health check once a year. You just have to take the initiative to head on over and talk to them. You may find you’re eligible for discounted rates or reduced fees due to your loyalty. If you don’t get any joy then there are plenty of other providers out there vying for your attention. It might be worth doing a comparison check and seeing if you can get a better deal. The less interest and ongoing costs you have, the faster you’ll get through that loan.   

 

3 – Shake up that monthly repayment and break it down to weekly payments instead. Don’t wait until the end of the month to make one big payment. Pay it weekly. Since interest is calculated every single day you will save money by popping a little extra in that much quicker. This tip works best if you can take the monthly repayment and divide it by 4 to get your weekly repayment amount. You’ll actually end up paying much more than the minimum monthly repayment over the year this way.  

 

4 – Focus and prioritise. It’s easy to fritter away money without even realising where it’s going. Be mindful of what you’re doing with your money and make your decision a priority. This means you make a conscious choice not to spend money on expenses you don’t really use or could find cheaper alternatives for. Toss those dollars into the home loan instead.  

 

5 – Totally offset that mortgage. This is one of the best and easiest ways to keep that mortgage down. In fact if you use this tip you can totally ignore tips 1, 3 and 4. Phew, that makes it easier doesn’t it?  An offset account is a day to day transaction account that is linked to your mortgage. Every single dollar in your offset account counts as against the balance of your mortgage, reducing the amount of interest you are charged each month. (Just be sure it is a 100% offset account and not a partial offset account). Make sure all your income automatically goes into this offset account. That way your money will be working towards saving you mortgage costs from the moment you get it. You are still free to use the offset account when, and as needed. This means you’re saving on interest costs without even having to think about it.  

 

As an added bonus when you use an offset you don’t have to worry about interest deductibility. When you are living in your home your mortgage doesn’t give you any tax deductible costs. However if you should move out one day and start renting the property out you want to be able to claim the interest costs as an expense. Unfortunately if you frequently redraw from a mortgage or use it as a daily line of credit this will limit or eliminate any potential ability to claim the interest costs as a tax deduction. However, if you use an offset account instead then you don’t run into this problem since the money in the offset account never technically counted as loan repayments.  

 

You have a lot of options to help you pay off your mortgage sooner. For professional advice specifically regarding your circumstances, make sure you speak to your tax agent or financial planner.  

 * A finance or mortgage broker can save you time and money, but you should still do your own research. Be prepared to ask plenty of questions to help your broker find you a loan that meets your needs and offers value for money. Please note that Zac McHardy is not giving any legal or financial advice *

With another financial year underway it’s time to present your immaculately prepared paperwork to your tax accountant. Or, if you were a bit disorganised this year then the good old shoe box full of half faded receipts will get the job done… kind of.  

 

With the ATO expected to double the number of in-depth audits they conduct this year you might want to ensure that your claims are all eligible and properly supported. Given that rental properties tend to produce an abundance of claim errors it is important to really know your stuff or give full and complete details to your tax agent so they can get it done correctly for you.  

 

Check out this article for some insight into common deduction mistakes as well as some tips for properly minimising your tax bill.  

https://www.domain.com.au/advice/heres-what-the-ato-is-cracking-down-on-this-year-849528/ 

So it’s time for you to buy your first home and take that big leap into home ownership. But what is one of the first steps you need to do after you have been trawling the net for that perfect home?

It’s smart to keep a level head and be realistic which I know is hard for your first purchase. I have been in the same boat and even for me it was hard. Most first home buyers will need to borrow to buy so before you go much further you need to know how much you can borrow and if you can borrow at all.

 

As I have mentioned before its best to speak with a broke like Neil who can help you through all of the options for you. You can quickly jump online to any of the banks and see what you can borrow but it’s about the pre-approval process that matters. Online calculators might tell you can borrow $600,000 but once pre-approval is put through you will find that might not be the case.

When applying for a pre-approved loan you will need to provide some additional documentation, such as:
▪ Proof of deposit
▪ Proof of income
▪ Monthly expenses and other outgoings such as loans, credit cards and store cards.

If everything works and you fit what the banks will approve then you can start to make offers on homes.

Things to remember.

It’s free to get pre-approval
Most are valid for 3 months
You know what your budget is when making bids and offers on home
Shows the agent you are ready to go
If you would like any further information about mortgage brokers please give Neil a call on 0409762581 or email him at nlorrigan@chl.net.au

* A finance or mortgage broker can save you time and money, but you should still do your own research. Be prepared to ask plenty of questions to help your broker find you a loan that meets your needs and offers value for money. Please not that Zac McHardy Is not giving and legal or financial advice *

Why using a Broker is a smart idea.

Have you been looking to purchase your first home, investment or upsizing? Then you may have looked at all the different lenders and the options that they supply but unsure which way to go. This is where a good mortgage broker can pay off and help find you the most suitable loan for you.
As always it is wise to shop around. Do some checking for yourself to make sure the loan works for you and is competitive.

So what are some benefits of using a finance broker?

A broker will sit down with you, usually in your own home or another location convenient for you, and show you the range of loans available from different lenders. They will then help you narrow them down to a loan that might suit your needs. Once they have a clear understanding of your financial situation and goals, your broker will be able to advise you on your home loan options. A mortgage broker will take the time to understand your needs, discuss your financial circumstances, and identify your loan requirements.

I personally use Neil Lorrigan from Choice home loans for my property and also my clients. Every time I have had a question or an issue he has always been able to help me. This is one of the most important parts when looking at getting a broker I have found. You need to be able to trust that they are working for you and can help when you have any questions or issues.

If you would like any further information about mortgage brokers please give Neil a call on 0409762581 or email him at nlorrigan@chl.net.au

* A finance or mortgage broker can save you time and money, but you should still do your own research. Be prepared to ask plenty of questions to help your broker find you a loan that meets your needs and offers value for money. Please not that Zac McHardy Is not giving and legal or financial advice *