End of Financial Year Tips for Property Investors

Prepare Your Investment Property for Tax Time

The end of the financial year is an important time for property investors to review their investment, organise records and make sure they have the information needed for their tax return.

Good record keeping throughout the year can make tax time considerably easier. It can also help your accountant or tax adviser identify legitimate deductions associated with owning and operating your investment property.

If you’re looking for property investment tax tips, the starting point is simple: keep accurate records, understand the expenses associated with your property and seek professional taxation advice before making decisions purely for tax purposes.

At Verdi Property Management, we help rental providers maintain clear records of rental income, expenses and property management activity throughout the year, making EOFY preparation much simpler.

1. Organise Your Rental Income Records

Your first step should be making sure you have a clear record of the rental income received during the financial year.

If your property is professionally managed, your property manager should be able to provide an end-of-financial-year statement summarising the financial activity relating to the property.

This can give your accountant a useful starting point when preparing your tax return.

2. Review Your Property Management Expenses

Professional property management involves a range of costs throughout the year.

Depending on your circumstances and current Australian taxation rules, some property-related expenses may be deductible.

Your records could include:

• Property management fees
• Leasing fees
• Advertising costs
• Routine inspection or administration expenses
• Maintenance coordination expenses
• Other management-related charges

Keep your annual statements and invoices together so they can be provided to your accountant.

3. Keep Records of Repairs and Maintenance

Maintenance is one of the most significant ongoing costs associated with owning a rental property.

Keep invoices and supporting documentation for work such as:

• Plumbing
• Electrical repairs
• Gardening
• Cleaning
• Painting
• Appliance repairs
• General maintenance
• Smoke alarm servicing
• Gas and electrical safety checks

Importantly, not every property expense receives the same tax treatment.

There can be an important distinction between a repair, an improvement and a capital expense, so your accountant or tax adviser should determine how individual expenses should be treated.

4. Review Your Insurance Expenses

Keep copies of your insurance policies and premiums for the financial year.

These may include:

• Landlord insurance
• Building insurance
• Public liability cover where applicable

Your accountant can advise which insurance costs may be deductible based on your circumstances.

EOFY is also a useful opportunity to review whether your current level of insurance remains appropriate for the property.

5. Consider a Tax Depreciation Schedule

Property investors sometimes overlook depreciation when preparing their tax returns.

Depending on the property, its age, construction history and eligible assets, a tax depreciation schedule prepared by a qualified quantity surveyor may identify depreciation deductions available over time.

A depreciation schedule may cover eligible:

• Building components
• Fixtures
• Fittings
• Appliances
• Other depreciable assets

The rules surrounding depreciation can be complex, particularly for second-hand residential properties, so professional advice is important.

6. Review Loan and Interest Records

If your investment property is financed, make sure you have appropriate records relating to the loan and interest charged during the financial year.

The tax treatment of interest can depend on how borrowed funds were used rather than simply which property secures the loan.

For this reason, investors should be particularly careful when refinancing, redrawing funds or using an investment loan for private purposes.

Your accountant or tax adviser can determine what portion of your interest expenses may be deductible.

7. Keep Records of Council Rates and Other Property Costs

Don’t overlook the smaller expenses associated with holding your investment property.

Records worth keeping may include:

• Council rates
• Water charges paid by the rental provider
• Owners corporation fees
• Insurance
• Professional fees
• Safety and compliance expenses
• Pest control
• Gardening and maintenance

Having these documents organised makes it much easier for your accountant to review your property’s expenses.

8. Understand Repairs Versus Improvements

This is an area where property investors should be particularly careful.

Repairing an existing damaged component of a property may be treated differently for taxation purposes from replacing or substantially improving it.

For example, repairing part of an existing fence may potentially be treated differently from replacing the entire fence with a substantially improved structure.

Rather than assuming an expense is immediately deductible, retain the invoice and ask your accountant how it should be classified.

9. Don’t Make Unnecessary Purchases Just for a Tax Deduction

EOFY often brings discussions about spending money before 30 June to increase deductions.

However, spending $1 simply to obtain a tax deduction does not automatically make financial sense.

Any maintenance, replacement or improvement should primarily make sense for the property itself.

If you’re considering bringing forward significant expenditure for taxation reasons, speak with your accountant before proceeding.

10. Review Your Property’s Rental Performance

EOFY is also a good opportunity to look beyond tax and assess how your investment actually performed.

Consider:

• Total annual rental income
• Vacancy during the year
• Current weekly rent
• Maintenance expenditure
• Property management costs
• Upcoming major repairs
• Current market rent
• Overall property condition

A property achieving a strong weekly rent can still underperform if it experiences excessive vacancy or unnecessary expenses.

Reviewing the complete picture gives you a better understanding of your investment’s performance.

11. Check Whether a Rent Review Is Due

Market conditions can change considerably over a 12-month period.

As part of your annual investment review, consider whether the property’s current rent remains consistent with comparable rental properties in the local market.

At Verdi Property Management, we assess comparable properties, current listings, recently leased properties and local rental conditions when completing rent reviews.

Regular rent reviews can help ensure your investment remains appropriately positioned in the market while complying with Victorian rental laws.

12. Plan for the Next Financial Year

EOFY shouldn’t only be about looking backwards.

It’s also an opportunity to plan for the next 12 months.

Consider whether your property may require:

• Painting
• New flooring
• Heating or cooling upgrades
• Appliance replacement
• Landscaping
• Preventative maintenance
• Compliance works
• Energy-efficiency improvements

Planning larger expenses ahead of time can help you budget effectively and minimise unexpected costs.

How Professional Property Management Helps at Tax Time

One of the benefits of professional property management is having a clear record of your property’s financial activity.

Throughout the year, your property manager can help maintain records relating to:

• Rent collected
• Management fees
• Maintenance
• Contractor invoices
• Leasing expenses
• Compliance costs
• Other property-related expenditure

These records can then be provided to your accountant or tax adviser to assist with preparing your tax return.

Your property manager shouldn’t replace your accountant, but good property management can make your accountant’s job considerably easier.

Frequently Asked Questions

Are Property Management Fees Tax Deductible?

Property management fees associated with earning rental income may be deductible in certain circumstances. The applicable tax treatment depends on your individual circumstances, so confirm this with your accountant or registered tax agent.

Can I Claim Repairs to My Investment Property?

Some repairs may be deductible, while improvements, replacements and capital works can be treated differently. The nature and timing of the work can affect its tax treatment, so retain your invoices and seek professional taxation advice.

Do I Need a Depreciation Schedule?

Not every property investor will benefit equally from a depreciation schedule. A qualified quantity surveyor can assess your property and determine whether preparing one is worthwhile.

What Should I Give My Accountant at EOFY?

This will depend on your circumstances, but commonly requested records include your property management EOFY statement, loan interest information, rates, insurance, maintenance invoices and details of other property-related expenses.

Get Your Investment Property Ready for EOFY

The end of the financial year is an ideal opportunity to organise your records, review your property’s performance and plan for the year ahead.

At Verdi Property Management, we provide rental providers across Geelong with clear financial reporting and proactive management throughout the year. From rent reviews and maintenance management to compliance and annual statements, our focus is on making investment property ownership simpler.

If you’re considering changing property managers or purchasing an investment property in Geelong, contact Verdi Property Management to discuss how we can help manage and protect your investment.