Many property owners in Sydney find it quite challenging to manage property taxes. Investment in properties often delivers financial rewards. However, there are several complexities associated with the tax aspect of ownership. There can be big tax bills, missed deductions or penalties due to even small errors. The expertise of a property tax accountant Sydney becomes invaluable due to this reason.
A professional accountant understands the common mistakes to avoid and can help property owners to stay in compliance as well as maximize returns. Take a look at the common property tax mistakes that a property tax accountant can help you to prevent in Sydney.
Misclassification of property
This is one of the most common errors. The Australian Taxation Office (ATO) has different rules for commercial holdings, investment properties and primary residences. If you claim your investment property as your primary residence, there can be big penalties upon an audit.
A property tax accountant can classify your property accurately, from the very beginning, preventing any compliance issues down the line.
Errors in claiming deductions
As a property owner, you may misunderstand what can be claimed as a deduction. Generally, loan interest repairs, council rates and property management fees are deductible. But there can be confusion while distinguishing between improvements and repairs. Repairs are immediately deductible whereas improvements need to be depreciated over a period of time. If you categorize such expenses incorrectly, it can reduce your benefit as well as trigger an ATO scrutiny.
This is where a professional accountant can ensure clarity. He can help you to overstep compliance boundaries and claim everything that you are genuinely entitled to.
Poor timing of expenses
The timing of deductions and expenses is critical, although often ignored. For example, if your property remains vacant for several months before you rent it out, the deductions may face restrictions during that time. Similarly, if you renovate your property before renting it, those renovations can alter how expenses are treated.
However, a top property tax accountant Sydney can advise you about the best timing to structure your expenses, so that the ATO does not miss or disallow your deductions.
Misunderstanding Capital Gains Tax (CGT)
For property owners, capital gains tax (CGT) is among the trickiest areas to deal with. When you try to sell an investment property, CGT obligations can arise, and calculating them is rarely straightforward in these situations. You can encounter a more complex situation if your property has been both a rental and a residential one.
An experienced property tax accountant can apply the right discounts and CGT concessions to your case. It can help you to reduce your liability in a legal way.
Inadequate record-keeping
When it comes to property taxation, it is essential to maintain accurate records. If you miss receipts or fail to record regular expenses like insurance premiums, council rates or strata fees, there can be problems during an audit. It can also reduce your claims.
An expert accountant can help you with proper tax filing. He can also recommend systematic ways to maintain compliant records over the long term.
Misapplication of negative gearing
When used in a proper way, negative gearing can be a very effective tax strategy. People often misunderstand this concept. For example, they wrongly assume that every loss can be offset without restriction. Incorrect application of the rules of negative gearing can reduce your compliance. You might even end up triggering penalties.
A property tax accountant can structure your investment strategy in the right way. You can balance your immediate tax benefits with long-term financial objectives.
Overlooking depreciation schedules
If you fail to claim depreciation correctly, you may miss out on major deductions. Both your building structure and the fixtures inside are eligible for depreciation claims. If you do not follow a professional depreciation schedule, your deductions can go unclaimed.
Professional accountants prepare detailed schedules and they often work with quantity surveyors to do this. This ensures maximum deductions and effective compliance.
Going for a professional tax accountant from a top company like Prowess Business Advisers can help you to avoid common mistakes. You can get effective guidance, which can safeguard your investments, make the most of the financial potential of your property ownership and minimize your tax liabilities.