Tax deductions rule as real estate investors face uncertainty

Cricket great Bill Lawry’s exclamation “it’s all happening” applies to real estate investors today, so don’t miss out on tax deductions.

The federal election is four weeks away, tax time less than three months away, and sandwiched between that is an increasingly likely Reserve Bank interest rate cut on May 20.

To quote former Aussie cricket captain and commentator Bill Lawry, “it’s all happening!”

And while Australia’s 2.3 million residential real estate investors follow the federal election campaign, they may miss out on other valuable money moves.

Memories are still fresh for many of Labor’s negative gearing proposals from the 2019 election campaign. While unlikely to be repeated this year, there may still be some surprises up politicians’ sleeves.

New election policies are unlikely to affect investors this financial year, but ignoring tax strategies will, so here’s what property investors should think about now.

1. INSURANCE CHECK

Does your current landlord insurance policy compare well with others, given huge premium rises in recent years?

Also, consider prepaying your annual premium before the end of June, which brings forward the tax deduction to this financial year.

2. ORGANISE REPAIRS NOW

Maintenance and repairs also are tax-deductible, so fixing stuff in the next few months means you won’t have to wait as long for the deduction. If you do the maintenance after July 1, you’ll be waiting more than a year to get a portion of your money back.

3. PREPAY OTHER EXPENSES

Your interest bill is usually the largest single expense when owning a rental property, and banks let you prepay a year’s interest in advance. Whether this makes financial sense will depend on your cash flow and tax situation. Other prepaid expenses could include rates, pest control and security fees.

4. GET THE GUIDE

Every year the Australian Taxation Office releases a Rental Properties guide, which can be downloaded or ordered online. It contains valuable information about allowable deductions, income, capital gains tax, depreciation guidelines and more.

The 2024 version landed in May 2024 and is still current, or you can keep an eye on the ATO website for the coming 2025 version, and when it arrives you can be like Bill Lawry and shout “got him! Yes!”

Cricketer Shane Warne with TV cricket commentator Bill Lawry in 1998.

5. DON’T FORGET DEPRECIATION

Depreciation is often the second-biggest tax deduction after interest, yet many people don’t maximise them. New fixtures and fittings can be written down in value each year, and most properties’ construction costs can be too. Tax depreciation reports cost hundreds of dollars but are tax-deductible themselves.

6. CONSIDER TIMING

Planning on selling? As we approach June 30, it’s worth thinking about capital gains or losses, and how they can affect your overall tax return this year. Delaying or bringing forward may be beneficial. Land tax too affects some states where assessments are based on June 30, so don’t get stuck with a bigger-than-necessary bill.

7. ELECTION WATCH

Both major parties haven’t spoken much about tax treatment of real estate, but something could pop up in the weeks ahead.

Negative gearing and capital gains tax rules are probably safe, given Labor’s 2019 loss, because they know that a similar policy could result in another famous Bill Lawry line, uttered after the infamous underarm incident in 1981: “the crowd boo, and it’s all over”.

Originally published as Tax deductions rule as real estate investors face uncertainty