The start of the fresh financial year offers a prime opportunity to evaluate your investment property. Take into account these six important steps to ensure your investment thrives in the 2023/24 tax year.

1. Review your financial statements

One important way to kick off the new financial year on the right foot is by reviewing the financial statement for the previous year, which your property manager will provide for your accountant. However, landlords themselves can derive value from this document as well.

2. Assessing repair versus replacement options

Take the time to analyse your income and expenses. For example, it's essential to evaluate the cost-effectiveness of repairing versus replacing certain items in your property, such as an old air conditioner or dishwasher. If the repair costs amount to hundreds of dollars, it may be more practical to consider replacing the aging appliance the next time it malfunctions. Your accountant can assist you in this assessment.

3. Understand the difference between depreciation and a deduction

If you do decide to replace an air conditioner or dishwasher, it's important to understand the difference between depreciating assets and deductible expenses.   Depreciation allows you to claim the expenses over several years based on the asset's wear and tear. On the other hand, if you choose to repair an ageing appliance, you can claim the full repair cost in the year it was incurred. It's crucial to understand the distinction between repairing and replacing an appliance in terms of how these expenses are claimed through tax.

4. Maintain an up-to-date depreciation schedule

As part of your financial year planning, ensure that your tax depreciation schedule is up to date. A depreciation schedule is a valuable tool for property investors and their accountants as it helps unlock available tax deductions. The schedule accounts for the wear and tear experienced by a property over time, which the Australian Taxation Office (ATO) recognises as an expense that investors can claim as a tax deduction.

Surprisingly, even experienced investors sometimes overlook depreciation reports, resulting in missed opportunities for significant deductions worth many thousands of dollars. Therefore, it's crucial to prioritise and maintain an updated depreciation schedule.

5. Check your landlord insurance

Although most tenants are responsible and take good care of rental properties, there are always exceptions. To protect property investors from potential financial losses associated with their rental properties, landlord insurance exists. This type of insurance policy is specifically designed to protect against various events, including intentional damage or theft caused by tenants or their guests, loss of rental income due to tenant defaults, liability coverage for claims made by tenants, and legal expenses incurred during legal actions against tenants.

It is essential to understand that not all landlord insurance policies are identical. Some policies supplement standard home and contents or strata title policies, while others offer more comprehensive coverage. Additionally, certain policies allow you to insure the contents of the property, which is useful if you rent out a partially or fully furnished property. Whether you’re paying $300 or $1,000 for your premium, neglecting to have landlord insurance is akin to driving a car without insurance—risky and potentially costly.

6. Confirm the value of your investment

An up-to-date appraisal of the value of your investment asset coordinated by your property manager has the potential to help you expand your real estate portfolio or ensure proper insurance coverage for your property.

Reach out to your Raine & Horne Property Manager today for a complimentary appraisal of your investment property, with no obligations attached.