» Investor resolutions

New financial year resolutions for 2018

BMT team — Tue, 24 Jul 2018 06:31:17 +0000

The new financial year is a great time to look critically at last year’s investing habits and identify any weak areas that can be improved for a more successful year ahead. The ability to question your investing habits and open yourself up to new ideas is key to strengthening your property portfolio and boosting your investing performance. Alternatively, if you are considering purchasing your first investment property this financial year, it’s important to be prepared with a clear set of goals to work towards. Pay attention to interest rates It is always important to keep your finger on the property pulse and monitor markets across Australia. They are known to move at different times based on key growth drivers such as employment, infrastructure, population growth, housing stock shortages and changing demographics. Aim to continue educating yourself with the use of data, market predictions and the help of expert advice. Remember, however, that the market can change and sometimes be difficult to navigate. Interest rates can unexpectedly rise at any given time and it is important not to over-leverage and put yourself in financial distress. It could be worth checking in with your bank or Broker to see what your borrowing power is and also to make sure you have the best rates on your current loans. You may also wish to get pre-approval organised so that if a must-have property comes available, you are ready to jump on it. Make improvements to your existing investments If you’re not planning on purchasing a new investment property this financial year, perhaps it is a good time to focus on making some improvements to your existing properties. Renovating an investment property can reward investors with increased value, improved rental returns and, of course, additional depreciation deductions. Before you dive into any renovations, it’s important to consider which assets attract the most depreciation deductions when replaced. Individual assets have a unique effective life, on which depreciation rates are based. If you’re considering which assets to add to your investment property, you can use BMT’s depreciation rate finder to weigh up which will give you the most returns. Remember to speak to a specialist Quantity Surveyor before commencing any renovation work as you may be able to claim for any removed and scrapped assets. Consider rentvesting If you’re looking to purchase your first investment property, rentvesting may be a viable option to get your foot in the door. Rentvesting is an increasingly popular way to enter the property market. It involves purchasing an investment property in a strong growth area while living in a rented property. Rentvesting allows investors to benefit from lucrative tax depreciation deductions without having to already own your own home. Get your finances in order Often when things get busy, paying attention to your budget can easily get put aside. If everything seems to be running smoothly, time poor investors often avoid making any changes to the way things are done. However, it is important to do regular checks and look for ways you can improve your situation now to benefit your future. Having regular meetings with your Accountant is one way that you can be sure you are not missing out on any possible return. Don’t be afraid to question your investing habits and involve professionals to assist you to get the most from your property. When it comes to depreciation, ensure you have a comprehensive tax depreciation schedule in place to capture all possible deductions and maximise your return. Contact the expert team at BMT Tax Depreciation to organise a tax depreciation schedule or to update your schedule if you have undertaken renovations.

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Tips to improve depreciation deductions this tax time

BMT team — Wed, 27 Jul 2016 02:28:43 +0000

A new financial year is here and with it, property investors will be readying themselves to visit their Accountant to complete their annual income tax return. With the Australian Taxation Office (ATO) encouraging property investors to be vigilant with their claims, it is important to seek expert advice on the deductions available. A large percentage of investors either fail to maximise or mistakenly claim incorrect depreciation deductions. To help investors to improve their deductions at tax time, a tax depreciation schedule should be obtained from a specialist Quantity Surveyor. Below are some tips to ensure you get the most from your depreciation schedule and improve the cash flow earned from an investment property. Request a site inspection so no items are missed A site inspection is perhaps one of the most important processes involved in arranging a tax depreciation schedule for a property. Not all depreciation schedule providers include one, so when you are calling to enquire about getting a report, make sure to ask if the property will be visited. During the site inspection, a depreciation expert will take photographic records of all of the depreciable items found within the property as well as take detailed notes regarding structural items. This allows every item to be accounted for when the schedule is processed and your Quantity Surveyor should list depreciation deductions for each item individually as well as provide a total for each year over the effective life of the asset. Depreciation for structural items (capital works deductions) should be outlined separately in the schedule to make it easier for an Accountant to apply a claim correctly. Claim depreciation no matter how old the property is Owners of older properties often assume they are ineligible to claim depreciation deductions. This is in part due to restrictions the ATO place on claims for the capital works component of the property. Although legislation states that only the owners of properties in which construction commenced after the 15th of September 1987 can claim capital works allowance, these restrictions do not apply to plant and equipment assets. Older properties also have often experienced a renovation or had some of the items contained updated over time. Even if these renovations or improvements have been completed by a previous owner of the property, the new owner may be entitled to claim deductions so long as these changes were made within the ATO legislated dates. Ensure the schedule is up to date to include any recent capital improvements If you already have a depreciation schedule, ensure it is kept up to date if you make any changes to the property. Repairs to fix damage or maintenance to prevent deterioration of items in a property can be claimed as an immediate 100 per cent deduction in the year the expense has occurred. Be careful, however, as if an item has been improved beyond its original state at the time of purchase, this will be considered a capital improvement by the ATO and must be classified as either capital works deductions or plant and equipment and depreciated over time. An investor should contact their specialist Quantity Surveyor before completing any renovations that involve removing existing structures or plant and equipment assets. This is because there may be remaining depreciation deductions available for these items which can be written off. A process called ‘scrapping’ allows investors to write-off any remaining depreciable value for items in the year the item is removed. An updated schedule should always be obtained after completing renovations or improvements to ensure that any new items are included for future depreciation claims. Ask your Accountant to help you apply for a Pay As You Go (PAYG) withholding variation Did you know that you don’t need to wait all year to take advantage of depreciation deductions? A Pay as You Go (PAYG) withholding variation allows individuals to vary the amount of tax withheld by their employer in each pay to anticipate their tax liabilities. This means investors can take advantage of deductions regularly, rather than waiting until the end of financial year for their tax refund. To apply for a PAYG withholding variation, investors should speak with their Accountant. They will provide advice on whether a PAYG withholding variation is suitable for an individual’s circumstances. They will then submit estimated financial information to the ATO. An investor can use a depreciation schedule provided by their Quantity Surveyor to support a PAYG withholding variation application. The additional cash flow that can be claimed from depreciation can reduce the tax an individual needs to have taken out of their pay. Once the PAYG application has been processed, a property investor’s expected tax refund for the financial year will be estimated, allowing their employer to take less tax out of their wages. This allows the additional cash flow from depreciation deductions to be used regularly as needed, which can be quite handy when repairs and maintenance costs arise or to help reduce loan liabilities. Seek advice from a specialist Quantity Surveyor Quantity Surveyors are one of a few select professionals recognised by the ATO under Tax Ruling 97/25 with the expertise necessary to estimate construction costs for depreciation purposes. Calculating deductions correctly without the help of a Quantity Surveyor can be extremely difficult, particularly as depreciation legislation is complex an often changing. Using their affiliations with industry regulating bodies, Quantity Surveyors gain access to the latest information and resources. Check to ensure your Quantity Surveyor is an accredited member of the Australian Institute of Quantity Surveyors (AIQS) and The Royal Institute of Chartered Surveyors (RICS). If you haven’t yet engaged a specialist Quantity Surveyor, it is definitely worth a quick call to see how you can benefit from claiming tax depreciation on your investment property. The cost of a depreciation schedule is 100 per cent tax deductible and investors can also claim back two years’ worth of missed depreciation deductions if they have not been maximising or making a claim.

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Investor resolutions for 2016

Bradley Beer — Wed, 02 Dec 2015 05:37:58 +0000

Negotiating the property market throughout 2015 wasn’t without its challenges for investors. In June we saw Australia’s national median house price reach $701,827, an annual growth of 11.7 per cent. Sydney’s median house prices also reached the $1 million mark. As investors, we were also buoyed by news from CoreLogic RP Data in their September 2015 quarterly review that residential property in Australia was the single most valuable asset class, with a total estimated value of $6.0 trillion as of July 2015. However, as home values reached all time highs, investors were then faced with the challenge of increased interest rates as a number of lenders made changes due to restrictions the Australian Prudential Regulation Authority placed on banks to hold more capital against mortgages. As a result of this action and also due to an increase in supply of the number of properties available on the market, during the later part of 2015 we’ve seen falling auction clearance rates. In May 2015, Sydney and Melbourne’s auction clearance rates were sitting at 86.2 per cent and 80.3 per cent respectively. By November, these figures had dropped to 58.4 per cent in Sydney and 69 per cent in Melbourne. Despite this, Sydney and Melbourne still continue to be the main drivers of home value growth and escalating prices in these cities have meant many investors have turned to other capitals and regional areas which offer affordable entry points into the market. This has also been reflected by the number of tax depreciation schedules BMT Tax Depreciation have prepared for investors outside Sydney and Melbourne. Regions such as Nowra in New South Wales and Albury Wodonga on the New South Wales and Victorian border saw an increase of 34 per cent and 26 per cent growth respectively in the number of schedules produced over the year. In Queensland, Redcliff City has seen a growth in the number of depreciation schedules produced of 39 per cent over the year while Joondalup in Western Australia saw an increase of 23 per cent and Alice Springs in the Northern Territory saw an increase of 36 per cent. Of the capital cities, Hobart is also beginning to see the results of increased interest. During the last year, BMT Tax Depreciation saw an increase of 11 per cent in the number of reports produced for this area and this has also been mirrored by rental yields. According to CoreLogic RP Data’s gross rental yield report for October, Hobart is achieving the best results for investors with gross rental yields sitting at 5.3 per cent for both houses and units. As traditional investor hot spots change and some areas experience cooling while others become more popular, it’s a reminder for investors to stay prepared for what the market has to offer in 2016. With the hindsight of the lessons learnt during 2015, the following are my New Year’s resolutions as a property investor. I will go outside my comfort zone It’s not uncommon for investors to look closer to home when buying an investment property, particularly when it is their very first purchase. However, this can potentially lead to selecting an area due to its familiarity, rather than the growth potential. It is important to seek advice on the historical growth of an area before making a purchase and consider looking at surrounding areas or even suburbs in other states that could provide better returns. I will not follow the herd Investors who rush to purchase in hot spots can also be guilty of overlooking other possibilities. Sydney offers a great example of this. While the city has seen a substantial amount of attention from investors in recent years due to price growth, it is important to also look at the rental yields that will be achieved from the property. The latest data from CoreLogic RP Data on gross rental yields for Sydney shows houses have a rental yield of just 3.1 per cent while units sit at 4.1 per cent. It is important to consider what can be achieved from a property in the long term and all too often investors buy into an area hoping for quick results rather than achieve long term gains. I will look at the complete picture When making purchase decisions it pays to have a complete picture of your cash flow. All too often I see investors have done their research to find out what income they will receive, but less rarely will they look at the expenses involved and find out what tax deductions they will be able to claim to improve their cash flow. Knowing what deductible expenses you can claim may affect what property you are able to afford. A tax depreciation estimate can also help buyers to work out the true costs of holding a property. I will budget now for the future Often when things get busy, paying attention to your budget can easily get put aside. However, it is important to do regular checks and look for ways you can improve your situation now to benefit you in the future. When it comes to depreciation, many property investors wait until the next financial year to take advantage of the claims available to them. However, there are ways to take advantage of deductions in your budget now rather than wait. Ask your Accountant to set up a Pay As You Go (PAYG) withholding variation. This allows investors to take advantage of the deductions regularly by having less tax taken out of your wages, rather than waiting until the end of financial year for your refund. It can also enable investors to save for necessary repairs and maintenance, save for a future renovation, or even pay off their loan sooner. I will learn from the experience None of us really knows what 2016 will bring. While we can make predictions based on current data and watch interest rates to see if they will rise or fall and try to uncover the future hot spots which will provide […]

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