We are fast running up to the end of the tax year. It is time to review your financial arrangements and consider the steps that you may be able to take to minimise your tax obligations.
Please discuss with your financial advisors your income protection position, managing capital any gains and losses, superannuation strategies including additional contributions, and, optimisation of tax offsets and more generally, any other deductible expenses incurred in earning assessable investment income.
In relation to property investment some things that you may consider.
Some lenders allow borrowers to prepay interest on investment loans – normally 12 months in advance. Where this is the case, the prepayment of interest may enable you to bring forward the interest expense to offset taxable income. Where rental rates are expected to soften over the next year or so it may be appropriate to maximise loan interest payments in the current year.
Prepaying interest in this way also allows you to lock in an interest rate for the prepayment period.
Investors should be aware that lenders may charge a fee for the prepayment of interest and should consider this expense in any decision.
If your current lender or the lender product that you have does not allow pre-payment of interest only or the rate offered and associated fees seem to be unfavourable talk to a mortgage broker. A broker can readily provide you with current market options and comparisons. You still have time before 30 June to switch your business to a Lender that more closely accommodated your needs.
Rental property deductions
Landlords can claim deductions for a range of expenses such as body corporate fees, municipal rates and taxes, insurance, interest on investment loans, property agent/management fees and expenses such as advertising, garden maintenance, electricity and gas.
You may also be able to write off the cost of certain buildings, depreciating assets and borrowing costs over time.
Make a list of the rental property specific expenses you have incurred in the current financial year, compare this with the previous year’s expenses and check with your accountant as to the completeness of the standard deductibles and what opportunities to maximise these deductions.
Feel free to drop me a note or give me a call if you would like more information regarding the payment of interest in advance.
Peter Spooner is a qualified and highly experienced residential property financing specialist. He has access to over 800 loan products from a panel of over 30 Lenders (including all of the major banks) plus reach-back to over 500 Loan Market associates when formulating solutions for his clients.
Peter is available after hours does not charge a fee-for-service.