The PROPERTY DOCTORS, Sydney Australia Novak Properties

EP. 1434 Naughty Tax Time for Landlords

• Mark Novak, Cleo Whithear • Season 30 • Episode 1434

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Tax time is looming for property investors, and the countdown to June 30th has officially begun. This timely discussion with expert property manager Cleo Ritchie uncovers the essential strategies that savvy landlords are implementing right now to maximise their tax benefits.

The conversation dives deep into the critical importance of proper preparation, revealing why June represents the busiest period for property managers nationwide. Cleo explains how landlords should be finalizing maintenance work, collecting outstanding invoices, and ensuring tenant payments are up-to-date before the financial year concludes. She emphasizes the genuine financial impact of negative gearing benefits – showing how property investors in higher tax brackets can effectively receive 40% or more of their maintenance costs back through tax deductions.

Perhaps the most valuable gem in this discussion is the detailed explanation of the consolidated rental statement – what Cleo describes as "gold" for landlords at tax time. This comprehensive document compiles an entire year's worth of property financial data in one place, eliminating the need to hunt through emails and receipts. We also explore more advanced tax strategies employed by experienced investors, including the strategic withholding of rental income until the new financial year and the potential benefits of prepaying mortgage interest. These legitimate approaches can significantly reduce an investor's tax burden while maintaining full compliance with tax regulations.

Whether you're a seasoned property investor or just starting your journey, this episode provides actionable insights that could put thousands of dollars back in your pocket. Don't miss Cleo's parting advice about the optimal timing for contacting your property manager about tax matters – waiting until the last minute could cost you dearly. Ready to make this tax season your most financially rewarding yet? Listen now and discover how to work the system legally and effectively.

Speaker 1:

now, all right. Naughty people, naughty landlords. 30 june is approaching and there's things you should and should not do when you're a landlord. We're going to teach you this morning with expert property manager cleo. Stay tuned, I'm the ringleader, so let's go Export. Expert property manager Claire Ritchie. How are you?

Speaker 2:

I'm good, thank you. I'm a bit of an export actually, now that you think about it.

Speaker 1:

Yep export expert. What's been happening this morning?

Speaker 2:

Oh, just mum life getting the kids ready. It's cold, my 11-year-old doesn't want to wake up so he's still asleep, so he'll be right on the bell at 8.45 at school this morning I would say but yeah, just getting ready for the day. I've got quite a lot on. It's a busy time of year June for property managers, and there are obviously the looming tax time, 30th of June, questions that come up from our landlords and even our tradies as well. So this is a very busy time for us property managers in real estate.

Speaker 1:

I'd imagine the tradies are getting all their invoices in earlier than ever.

Speaker 2:

Yeah, and especially this climate and every job's important, but you still get the invoices that are from like February and January for some of them. You're like, oh, I forgot about this job and I now have to remind the landlord again that we didn't pay for it in January or February. We're paying for it now, far out.

Speaker 1:

And tell me you're working. You know we're working with thousands of landlords at Novac. I love talking with you because not only can you aggregate a lot of people, but trends, what's happening, what they're doing, what's a clever landlord doing at the moment because of tax time approaching on 30 June?

Speaker 2:

At the moment. What they are asking for is all their invoices, which are normally attached. They're checking all of that out now and they're asking in advance to the 30th of June if there's any upcoming work that we might have had rollover as in maintenance, not completed, and they want it all tidied up for the end of financial year. So basically they will be asking for you know, that plumbing job that was outstanding. Can you make sure that that's done now, before you know the 30th, and having all of that organised, yeah?

Speaker 1:

And for people that don't understand how this works negative gearing in this country is an incentive for landlords, one of the few that's left over, and what happens is if you're paying 40% tax or whatever you know. So depending on how much you earn is depending on the tax percentage that you pay. And say you're earning an x amount, you're paying 40 tax. Now if you have a out, an invoice for a thousand dollars, you theoretically would get back 40 of that in the next, at the end of the financial year, after you've done your return. So it's a, and that upgrade stays with the property, that $1,000 upgrade stays with the property, the property's worth more, the property rents for more and then you've got a tax deduction of, say, 40% if you're in the 40 percentile of tax paying. So this is big, these are big-ticket items for landlords.

Speaker 2:

They are definitely paying. So this is big, this, these are big ticket items for landlords. They are definitely and they do budget that bathroom rental or that kitchen or that thing. You know that they've been saving for um, and they do that within the financial year. So they plan for this when they plan for the next one, um, as you said, it's all an investment. So, um, when you're negatively gearing these invoices and these works carried out are important as deductions and you know we do tax depreciation schedules for our landlords we do recommend a few companies and they're really good at crunching numbers and advising our clients, especially if they've bought new and off the plan. You're, you know, probably better talking about that than me, because I'm not the, you know, I do basic maths. I do understand it. However, yeah, we do have all these tools and all these people that we have, you know, just a dial away for our clients and we send them all this information come tax time.

Speaker 2:

The consolidated rental statement we send at the end of the year is gold. It has everything in this one statement for that entire financial year all the outgoings as in cancer, strataata water, all the fees that they pay, the management fees, the outgoings like the plumbing and electrical maintenance. It's all on the one statement and you just give that to your accountant. You don't have to go through all your emails and your you know personal scans and everything. So I feel that's probably the one of the most valuable statements they'll receive each year, the landlords and they can also say, wow, look, I got all this rent in this year and I've not really had to spend much because it's all there in the one statement.

Speaker 2:

Or I've spent a lot on this pass, on maintenance and things. You know, maybe I should talk to my accountant, you know, moving forward. So, um, the statement is coming up now. So on the 30th of june, our landlords will get that statement. Um, given there are a few that don't want it, that's fine. Um, but yeah, we do spend a lot of time preparing for this um statement coalition and everything, like our accounts people. Um, it's a big job and it's a big job rolling it out every year as well.

Speaker 1:

This statement coalition and everything like our accounts people, it's a big job, and it's a big job rolling it out every year as well. And tell me, it is a finite line 30th of June for people you don't know. If you forget to pay something or you forget to claim something, you are burning 30, 40, 46% of that amount. So it is critical you don't miss one invoice, one statement, one, anything. What should I be asking? And guys and girls out there, you've got to understand you pick up your phone to your account and you'll get charged. You pick up your phone to your property manager. You won't get charged If someone rings you and not saying you're an accountant, but you're a good aggregator of what people are doing. What should a landlord be asking you when they call you? Now's the perfect time because they can't call you two days before 30th of June. So now's the time to call your property manager. What should they be asking when they call you?

Speaker 2:

That's a good question. Thanks for putting me on the spot, Mark.

Speaker 1:

Chat your BT.

Speaker 2:

Well, I guess, when I will get my statement on the 30th or the next day or um, some of the tenants may not have their rent cleared by that date, um, and that money will roll over for the next, you know, the next month. So rent's another critical thing. Where is my tenant at? Are they up to date? Can you give them a bit of a nudge? It's end of financial year.

Speaker 2:

I really like this tidy um, especially if they're always, like I know, five or six days in arrears. So that's something you could be asking your property manager just to obviously make sure. I mean, we do that normally. But if you want it all nice and tidy come tax time, that would be also a question I'd be asking. But yeah, look, it's not like you said. It's not the end of the world if everything hasn't been done or collected by the 30th of june, but it does make that easier.

Speaker 2:

Um, you know, in coming this tax time period, I do have clients that are asking for their carpet and their reno to be done and ready by the 30th of june. So our handyman's under the pump with a couple of those. So, um, I do have quite a few maintenance jobs that I'm working on to to make sure that deadline is for the 30th. So, um, those clients, that's their requests and that's what we're going to aim to do, and we do this every year come in, come out. So, um, yeah, we're we're well aware of what we need to do.

Speaker 1:

So I know it's a really, really understanding silky smooth advanced landlord when they call me and say or when they call our property managers and say, can you not pay my rent?

Speaker 2:

Yeah.

Speaker 1:

So what happens is that month of income. There are landlords where we withhold their money on their request and we then give them their money the next financial year one day later. And the reason why is, you know, 10%, whatever it is 8% of their. It's 8% sort of less tax because they're pushing that income into the next year. Unfortunately, they've still got. They've got to do that every year. It's an advanced move less tax if you do that. The other thing I've seen landlords do is they call up their bank and ask if they can pay one year in advance interest. It puts them ahead in tax by a fortune. They almost get a double tax claim in interest for that year. Problem is you, you got to do that every year. Uh, you know after that. So there's little things that you can do. There's some nuggets that we've given you today you can take away to put more money in your back pocket yes, definitely.

Speaker 2:

Um, you know, I think you guys posted only a few days ago that that famous kerry packard um clip where he's talking about paying less tax. And who would want to pay less tax? So my favorite youtube clip, it is it's gold yeah, and having said that, I just did have a client ask me to roll over the rent because he's tenant paid 12 months in advance and he's like, can you not pay me that 67 000 on the 30th? I was like, no problem, there's lots of bills that need to be paid there.

Speaker 1:

There you go. There you go, cleo. Thank you so much. Hopefully we help people out there. It is a. I'm so glad you reminded us to bring up this topic today, because you've hit it right on the head with the timing.

Speaker 2:

All good guys, and don't be afraid of tax time. It's all good. We're here to help you.

Speaker 1:

Have a great day work it, work, it, work it. See, you have a great day bye you too.