A Pre-Tax Time Checklist for Property Investors

Sorting through heaps of receipts to figure out your allowable deductions isn’t anyone’s idea of a good time, right?

Property investment can be a rewarding venture, but it comes with its share of responsibilities, especially when tax season rolls around. To help you navigate the world of tax deductions, we’ve put together a tax checklist for property investors.

Follow these steps for a less stressful tax season:

1) Organise your documents early

Start by organising your documents now rather than later to make tax season less of a headache.

Collect all necessary paperwork, such as rental income statements, property management reports, and insurance information.

Consider digitising your receipts using various apps and tools to streamline the process.

Keep in mind the ATO still recommends you keep a backup of all your digital records.

2) Familiarise yourself with your allowable deductions

As a property investor, you’re entitled to numerous deductions. These can include advertising for tenants, council rates, water bills, maintenance costs, and depreciation on assets.

Check out the ATO’s Guide for rental property owners, Rental Properties 2022, for more insight into tax deductions for property investors.

3) Determine your assessable income

Assessable income comes from various sources, such as salary and wages, allowances, interest from bank accounts, dividends, bonuses, commissions, pensions, and rent.

Use a spreadsheet or online tool to record all your assessable income and allowable deductions for easy access by your accountant.

4) Lock in a date with your accountant

Accountants are like rockstars this time of year, so book in early to avoid disappointment. While you might consider doing your taxes yourself, enlisting the help of a tax accountant can save time and money, as they’ll know precisely which deductions you qualify for.

5) Plan for the future

You’re already diving into your finances, so why not take advantage to review your financial goals and plan for the year to come?

Consider refinancing your mortgage, consolidating debts, or you could utilise your equity to expand your property portfolio.

Whatever your investment strategy and long-term financial goals may be, we’re here to help you reach them.

Contact us today.

What the RBA overhaul means for interest rates

The Reserve Bank of Australia (RBA) is facing a major overhaul following an independent review.

What does it mean for interest rates and for Australian mortgage holders? We dive into all your questions in this article.

Why was there a review?

Treasurer Jim Chalmers announced the review in July 2022 – the first review of the RBA since the central bank started to target inflation in the early 1990s.

“The Review is all about ensuring Australia’s central bank and monetary policy arrangements are as strong and effective as they can be into the future,” Treasurer Jim Chalmers said.

The final report, ‘An RBA fit for the Future’, was released on April 20, 2023. It looked at the RBA’s performance over the past three decades.

What were the key recommendations?

The review made a lot of recommendations – 51 to be precise. The gist was for decisions about the cash rate to be made with broad input, and the reasons for any changes to be much clearer to the public.

Some of the key recommendations included:

  • The RBA should have a ‘monetary policy board’ with greater economic expertise and shift to eight meetings a year (instead of 11) to allow more time to consider issues.
  • There should be a press conference after each meeting to encourage more transparency, and board members should speak publicly about the board’s work.
  • Two separate boards should be established – one for monetary policy, the other for governance of the RBA.
  • The inflation target of two to three per cent should be retained.
  • There should be five-yearly reviews of the RBA’s monetary policy framework and policy tools.

So, what’s next?

The government is expected to legislate changes relating to the review from next year. Mr Chalmers has indicated he is hopeful the changes to the RBA could take effect by July 2024.

Meanwhile, RBA Governor Philip Lowe welcomed the recommendations. “The board will consider these issues over coming meetings and develop and implement a new set of arrangements,” he said.

What about the impact on interest rates?

As mentioned, the RBA currently meets 11 times a year on the first Tuesday of the month (except in January) and the board makes a decision about the cash rate. After the decision, lenders decide whether to adjust their interest rates.

If the recommendations of the review go ahead, the monetary policy board will meet 8 times a year. There will be more time between meetings for the board to weigh up the latest economic indicators before making a decision.

In other words, homeowners won’t get back-to-back rate hikes (or pauses or cuts) every month.

And with fewer cash rate changes, there will be more time for households to adsorb and adapt to any cash rate hikes.

On the flip side, with fewer meetings, it may also be necessary to make larger changes to the cash rate (which has been the case with the US Federal Reserve and the Reserve Bank of New Zealand).

Like to know more?

We’d be happy to answer any other questions you might have about the RBA overhaul and what it means for you. Please get in touch and let’s chat.

How your HECS-HELP debt affects your borrowing capacity

Do you know how much you owe on your HECS-HELP debt?

While student HECS and HELP loans in Australia are interest-free, they are indexed every financial year based on a cost of living index.

The recent outbreak of high inflation means millions of Australians with student loan debts are facing a 7.1% increase from 1 June, up from 3.9 per cent the previous year.

Your HECS-HELP debt is an important piece of information that banks take into consideration when assessing your application for a home loan, so it’s important to understand yours.

If you’re a bit vague about all the details, it’s worth reading on to see how indexation will impact you.

What is HECS-HELP?

The Higher Education Loan Program (HELP) is a federal government scheme that offers loans to students so they can afford their university and higher education courses.

Most university courses fall under the banner of a Commonwealth Supported Place (CPS). With these, the federal government covers some of the student’s university fees, while the student covers the rest – known as the ‘student contribution amount’.

Your HECS-HELP loan can be used to pay the ‘student contribution amount’. It can’t be used for things like accommodation, textbooks or your dormitory’s mini bar supply.

How do you find out how much your HECS-HELP debt is?

You can check the balance of your HELP debt, the indexation amounts and your voluntary and compulsory payments through myGov or by contacting the Australian Taxation Office (ATO) directly.

Do you pay interest on a HECS-HELP debt?

HECS-HELP debts are interest-free, but the amount of the debt is adjusted on 1 June each year in accordance with an annually determined inflation factor.

And because the cost of living and inflation has gone through the roof, the latest annual indexation factor is higher.

The 2022-23 HECS-HELP debt indexation factor for 2022-23 is 7.1%. To put it in perspective, in 2022, it was 3.9%. In 2021, it was 0.6%. Big difference, right?

Another way of looking at it is like this:

  • a $10,000 loan balance would increase by $710
  • a $25,000 loan balance would increase by $1,775
  • a $50,000 loan balance would increase by $3,550.

What does this have to do with getting a home loan?

When you apply for a home loan, lenders will look at your HECS-HELP debt when assessing your loan application.

While this type of debt is different from credit card debts and personal loans, you still need to make repayments on your student loan and this ultimately affects your income and borrowing capacity.

Paying off your HECS-HELP debt

Once you earn over a certain threshold, your employer will deduct a percentage of your income to go towards your HECS-HELP debt. The more you earn, the higher the repayment rate.

You can find more about the HELP repayment rates and thresholds here.

These PAYGW (pay as you go withholding) amounts are only applied after you do your tax return. So, if you were to jump online and look at your HECS-HELP debt today, your PAYGW payments wouldn’t have been applied yet.

What about voluntary payments?

You can make voluntary payments towards your HECS-HELP debt through myGov. Once processed, voluntary payments are credited directly against the loan balance by the ATO.

If you wanted to pay your loan balance off in full before indexation is applied on 1 June, you’d need to do so as soon as possible (taking into consideration bank processing times).

It is recommended to talk to your accountant or financial advisor about whether making voluntary payments is right for you.

Bottom line

Whether or not you are considering buying a property, it’s important to understand your HECS-HELP debt and how this year’s higher indexation could affect you.

If you’d like to find out more about how your HECS-HELP debt might be treated by lenders, get in touch and we’ll explain.

Additional Resource
https://www.realestate.com.au/home-loans/guides/can-you-still-get-a-home-loan-with-hecs-help-debt