G’day Friend
How outlook for life has changed over the last few months.
Some of the features of this period of time include,
- War in Middle East
- Higher fuel costs → higher inflation
- Increased costs of construction
- Greater growth in value of existing property investments
- Low unemployment – great for the country, tax collections higher, welfare expenses lower
- lack of experienced labour available to work
- increased prices with energy shortages and other factors feeding into higher cost of living
- Increasing demand for NDIS, aged care, health care sectors .. investors in NDIS properties enjoying better outcomes – watch out for changes from government while trying to control; spiralling NDIS costs
- INTEREST RATES – rising .. slightly offset by rising rents
- Lookout for state government controls favouring tenants including limits to timing of allowing increases and minimum rental terms
- RENTS – Higher rents helped investors with low loan balances.. Cash flow is usually king .. consider interest only loans where cash flow is an issue .. compared with slightly higher interest rates .. in a fast growing capital market
- Additional regulation including
- increasing rent only once a year
- longer notice period for evicting tenants – even if lease expired and they are on weekly/monthly rental
- IMMIGRATION – Slowing but continuing high immigration with some well funded pushing up prices
- Low housing supply, slow regulator approvals, rising constructions costs, short supply of qualified tradies.
- Increased scams, identity theft and HACKING of confidential data including tax file numbers – Be VIGILANT with providing your personal details
Growth rate in property values, depending on location has slowed .. but still strong due to shortage of supply. In some areas it may track back over that rapid rise over the last couple of years. Likely to still be positive when viewed over 7-10 year cycle. Timing of entry, exit and taking advantage of opportunities has seen many exit or change their positions with great results. PTS has responded to an increase in enquiries to assist with the tax implications of the resulting capital gains. Generally, planning ahead before actioning is best .. PTS have been called upon to assist in situations where the clients were made ‘offers they could not refuse’ prompting immediate response .. while the opportunity exists.
Enquiries to PTS have increased with a lot regarding capital gains tax impacts of selling/transferring/gifting including
- how much CGT will I pay if I sell
- how can we minimise the CGT liability
- how does the Main Residence exemption work as we moved out and rented the place
- selling previous Main Residence while a non-resident
- buying a block of land, constructing a duplex, splitting ownership between partners
Also queries regarding ownership structuring as to whose name should be on title for the new properties, thus minimising impacts in the future.
SUBDIVISIONS – With higher entry prices, limited supply many people are
- subdividing & constructing duplexes to
- get a newly constructed modern residence
- support children & their families in the second one
- sell one while keeping another as their Main Residence
- sell both as a developer making a profit
- many considerations with his move including
- CGT
- GST
- Lender approvals
ATO is back on the warpath … with a vengeance … chasing up outstanding debts and lodgements. People are receiving, mostly friendly, reminder calls as well correspondence. Do not ignore these. Best to respond and request arrangement to accommodate your circumstances.
Tax tip – as ATO continues to communicate electronically instead of sending paper – check your myGov account
Notwithstanding all the excitement, the boring reality though, is that tax returns still have to be lodged for 2026 financial year … So we thought to help with some tips to keep you ahead .. at least for this year.If you need support, clarification, advice or are uncertain about the tax treatment of income or Capital Gains, or just to prepare tax returns, please contact Shukri or Amir on 1800 800 829 (TAX) or email reception@propertytaxspecialists.com.au
Tax Planning – Tips for Property Investors
Planning to keep tax at a minimum is an exercise that should be carried out throughout the year and not rushed at the end.
With the financial year rapidly approaching its end, NOW is the perfect time to not only review the performance of your assets so far, compared to the budget prepared in 2025. but more importantly to start planning for minimising your tax bill for the financial year ending on 30 June 2026.
How – Review your figures over the last 9-10 months, estimate the next 2 month, then discuss with your property tax specialists or accountant where you are likely to be at the end of the financial year 2026.
But more importantly where you would like to be …. as well as to plan out strategies for the coming 2026/27 financial year.
To help, see below for some tax tips. To discuss further, call us on .. 1800 800 TAX
- Minimising Tax – using timing
- Capital Gains/Losses & Timing
- Prepayment of expenses – when should I do it
- Repairs & Maintenance – an ATO focus area
- Refinancing – Penalties on early repayment
- Depreciation Schedules – Quantity Surveyor’s reports
- Annual rent statement from the Agent – Accountants Templates or Cloud based software
- Vary your PAYG Withholding
- Super – Contribution caps
- ATO audit focus points for 2026 tax season – see below for more
ATO’s data matching program now would be able to collect:
- Client identification details – names, addresses, phone numbers, dates of birth
- Loan account details – account numbers, BSBs, balances, total interest charges, total repayments, and commencement and end dates
- Transaction details – transaction dates, transaction amounts, and whether the transaction was a debit or credit on the account
- Property details – addresses of the loan asset
- ATO’s new data-matching tool would harvest information from the big four banks as well others involved in rental property investment loans from Macquarie through to regional institutions such as Bendigo Bank and loan providers including Ubank and RAMS.
Another key weapon in the ATO’s data matching arsenal was the use of Australian Transaction Reports and Analysis Centre (AUSTRAC), which allows the Tax Office to monitor international fund transfers and cross border movement of monetary instruments, among other things.
Minimising Tax – Using Timing
As the financial year moves to an end, whatever expenditure is incurred in up to June is considered part of that financial year and is reflected on the tax return – in this case the 2026 tax return.
Where the expenditure is tax deductible, this reduces the taxable income for that year. So the tax payable is also reduced.
Tax Tip– If you lodge your tax return early in the new financial year, then the tax saving can take effect quickly as you receive your refund. So the time taken between spending the money and getting a tax deduction is the smallest. This should help your cash flow. Property Tax Specialists emails Checklists and Templates to clients in the first week in July to facilitate this process.
Capital Gains / Losses – Timing
CAPITAL GAIN
Capital gains generated during the year can be minimised by offsetting it against capital losses or trading losses incurred during the same year.
Tax Tip– To reduce capital gain generated on sale of property or other assets during the year consider selling any assets which have lost value and their future is bleak.
Tax Tip – the 50% discount on capital gains is available where an asset is held for longer than 12 months. As this is a considerable saving consider the timing of any sale.
The relevant date for calculating capital gains is the CONTRACT date and not the settlement date.
Seek advice – for non tax residents new legislation is full of traps.
CAPITAL LOSSES
Capital losses incurred in any year are available to be carried forward to future years if there are insufficient gains to absorb it in the same year. It can be carried forward for an indefinite period.
Capital losses cannot be offset against other income such as business trading income or salary income.
MAIN RESIDENCE
Where a property was occupied as a Main Residence (MR), the exemption arising is a major concession.
Tax Tip– where applicable make available the days the property was a MR. Ensure concession has not been claimed for another property owned at the same time – but sold before hand
Prepayment Expenses – When should I do it?
Prepaying expenses up to 12 months ahead are allowed as a deduction in the earlier year. In this case 2026.
Prepaying expenses increases your deductions, reducing your tax.
Most people prepay the following types of expenses
- Rates – Council & water
- interest
- Strata Levies
- insurance – landlord, income protection
Before prepaying deductible property expenses, it is prudent to check on how your tax return may look – for that financial year. Do a bit of forecasting.
Property Tax Specialists does this with clients who are on annual support programs.
If you have investment properties – which are negatively geared (the interest and expenses are larger than the rental income) the negative component will be offset against other income such as salary, reducing your taxable income – reducing your marginal rate of tax and your tax liability.
In previous years, one of my clients had about $13k taxable income. If he were to prepay expenses – bringing the deduction forward to 2019 year instead of leaving them for 2020 – he would lose money.
Why? Because at $13k taxable income – no tax is payable. From 1/7/2013 the tax free threshold has increased from $6k to $18.2k. So claiming more deductions will NOT produce more refunds. It will however lose the opportunity of claiming the deduction in the next year.
Tax Tip– review your personal circumstances before prepaying any rental expenses.
Tax Tip– note that tax rates for 2026 are lower … this means the benefits of deductions are lower for tax rates click here
Repairs & Maintenance
If you are likely to have a high taxable income then you may like to bring forward repairs and maintenance for the investment property into 2026 financial year instead of leaving them to 2027. This will generate a deduction and save some tax.
Tax Tip – Care should be taken in determining whether a maintenance or repair is deductible or is it considered a renovation or of a capital nature … depreciable
If the work is fixing up damage caused by wear and tear, the expense is likely to be a repair. But where new materials replace the old, the item is likely to be considered of a capital nature and depreciated instead.
The difference is the amount that can be claimed as a deduction and therefore tax savings.
Improvements/Renovations are depreciated at 2.5% pa as building construction write-off
Example – If you repair the broken glass of a window – that’s a repair. If you replace the whole window that’s an improvement to the property – depreciate at 2.5% pa.
Example – water leakage from old bathroom resulting in damage to walls into bedroom etc .. considered an improvement – depreciate at 2.5%
Refinancning – Penalties on early repayments
With low interest rates over the last year rising now, you may be considering refinancing. Where you have not used an Offset type loan facility, you may be up to pay a penalty for early termination of a fixed interest loan or interest and principal loan. This generally represents the loss the bank makes where they have borrowed and on lent at a high interest rate and now they can only re-lend at the lower rate.
The additional fee, call it a penalty or additional interest on the termination is tax deductible in the year it is incurred. To maximise the tax deduction do it before 30 June.
Caution 1 :– Before terminating, calculate the penalty and compare it to the savings particularly where the loan has a long term to run.
Caution 2 :– Where property values have declined – care should be taken. To refinance, lenders will review credit based on current lower values .. meaning they may not provide the same level of loan you are on at the moment. A finance broker to review your position first may be a great investment.
Cash Flow – if you can refinance – check if paying lower interest only at a higher rate is a better cash flow position than interest and principal repayment .. for the duration of the short term loan .. as values continue to rise
Depreciation Schedules – Quantity Surveyer’s Reports
Depreciation is the wear and tear on building and equipment. Claiming a tax deduction for this expense does not require any cash payment. You get a tax saving without paying any additional cash money.
To maximise your deductions it is prudent to get a Quantity Surveyor to produce a report for you as they are skilled cost estimators. Also they have to register with ATO. You get a nice report which minimises your accountants time and cost in preparing your tax return.
Tax Tip – A tax deduction is available, where you pay for this before 30 June 2026 … useful where you purchased a new property & interest expense was lower than expected.
While continuing the deduction for depreciation on the construction (Building Allowance/writeoff), note the 2017 budget has limited depreciation to new plant & equipment from 1/7/2017.
Tax Tip – So where a second hand investment property is purchased a deduction for depreciating plant & equipment (e.g. whitegoods) is no longer available.
It is only available where a new plant is purchased e.g. stove, hot water system etc.
Annual Rent Statement from the Agent – Accountants Templates
Most agents now send out Annual rent statements summarising the rental revenue collected and expenses paid on behalf of the landlord. These save a lot of time.
Make these available to your tax agent. Our clients are uploading to our client portal – where practical
Take care when using these statements to prepare your 2026 tax returns. Real estate agents do not always pay for all rental expenses including land tax and insurances. Landlords usually do that. Also many landlords pay for rates.
Tax Tip – Use your accountant’s rental templates to summarise all expenses and present a complete picture of each property’s situation.
Clients of Property Tax Specialists get these rental templates and others as part of their year end package.
Tax Tip – Scan your original documents and send to your accountant – or upload directly to their portal. This ensures you have access to original documents to check on reports produced by the accountant and in case of a tax audit.
Vary your PAYG Withholding
Where you have negatively geared rental investments, the rental loss incurred offsets against your other income e.g. salary, reducing your tax payable and may result in a larger refund when your tax return is lodged.
This refund can be used to reduce your loan, pay your interest expense or help finance another investment property.
To help with cash flow, would it not be great if you were able to access this refund, throughout the year instead of waiting till the end of the year? This can help finance that extra property which has potential to pick up some capital growth between the beginning and end of year.
This can be done by lodging an application to vary the ‘Income Tax Withholding’ using a form from ATO . This can be done electronically online or you can download the form, prepare and lodge it manually.
If you need help, contact your accountant. Property Tax Specialists provide this service. www.propertytaxspecialists.com.au
Tax Tip – Depending on your personal circumstances the additional refund from negative gearing may not be substantial. If the savings are small you should consider saving the cost of preparation and claiming the deductions at year end when lodging the tax return.
To get the maximum benefits out of the cash flow savings, late May/early June is the best time to prepare and lodge the Application for ITWV – because then you can get the full effect of lower tax deductions by the employer. ATO takes about 2-3 weeks to process the application.
Tax Tip – When lodging electronically ensure you keep a copy of the electronic receipt or make a record of receipt reference number. It helps when chasing up ATO.
Contributions to Superannuation
Disclaimer – with increased regulation by ASIC & APRA we can not give advice without considering the individual circumstances of each person. So the information below is NOT advice but only general information.
A contribution to a super fund before 30 June 2026 can be tax deductible. This should not be the only reason for making it.
Superannuation contributions are deductible in the year that the contribution is received by the fund’s trustee.
Tax Tip – Be sure to check how long your payment method takes to process – if you’re paying one or two days before the end of the financial year the payment may not be received by the Trustees until the new financial year – therefore, the deduction for the contribution cannot be claimed this financial year.
Where you are an employee check with your employer what salary sacrifice arrangements can be made before 30 June 2026. Because ATO wants these arrangements in advance of the sacrifice being made, this is a good time to plan for sacrificing income for the 2027 financial year .. if appropriate and fits within your financial plan as discussed with a financial planner
- To claim the extra contribution as a tax deduction Check with your super fund
- Admin tip – A ‘notice of intent’ to claim a deduction has to be lodged with the fund
- the fund must acknowledge the notice IN WRITING – before you can claim the deduction on the tax return – that way ATO can data match it
Carry Forward balances – Unused super contributions from 2020 year can be carried forward to be contributed and claimed as a deduction over the next 5 years .
- WHAT .. for people with super balances of less than $500k
- Contribution cap was $25k per year and $27,500 from 1/7/2021 and $30k from 1/7/2024
- HOW .. contribution has to be in the fund a/c before 30 June 2026
Check myGov portal to find out how much of unused super is available for you to use from each of the last few years
Contribution Caps
From 1/7/2017 deductions for contributions to super are capped at $25,000 for the 2019 tax year and beyond
This amount includes the SGC payments made by the employer.
The cap for 2026 year is $30,000
Tax Tip – before making additional contributions, check with your fund or employer to ensure the $30k cap is not exceeded .. but most of all check with your financial planner
Additional contribution to a Self Managed Super Fund (SMSF) maybe necessary to make up for any rental losses/cash deficit in a property owned by a super fund
Note – Regulators are discouraging SMSF’s from negatively gearing residential property into SMSFs. Consequently, due to the non-recourse loans which are forced on super funds by the legislation, banks are being discouraged to lend to SMSFs to acquire residential property.
Regulators are advising that if a fund has less than $500k in funds it should not consider a limited recourse borrowing arrangement .
Concessional contributions over the caps are effectively taxed at marginal rates – referred to as Excess Concessional Contribution
ATO Special Audit Focus in 2026
In an attempt to bring home the bacon, ATO has been aggressively putting out media ahead of the tax season in an attempt to have taxpayers comply with tax laws. Making their electronic data matching easier is position is ATO’s highly improved AI technology with access to all public registers of data as well as Crypto exchanges
ATO audit focus points for 2026 tax season
Crypto
- ATO has access to data and knows you are trading
- reports it on your pre-fill report
- will data match with tax return lodgement
- ATO considers this to be a capital asset
- profit/loss on sale is a capital gain/loss
- needs clear records – apps available to summarise results for use by taxagent in tax preparation include Koinly and Crypto Calculator
- Tax Tip capital losses can only be offset against capital gains – not other income
Work related expenses particularly
- ATO wants to make sure there is a nexus between the expense and earning of income
- Home Office
- From 1/7/2023 the older hybrid methods are replaced with one rate of $0.70/ hr
- ATO will look for substantiation of hours worked such as a diary record/log book
- Car Expenses
- ATO will check for log books & business travel records such as diaries
Rental property
- higher rents due to market increases
- deduction for holiday homes where not available for rental
- claiming the correct interest expense
- ATO is using AI to data match interest expenses claimed to the loan details from the lenders
- Tax Tip– keep your records substantiating the amounts claimed
- Banks and other lenders will now be required to collect information on 1.7 million residential property loans which the ATO can then compare with taxpayer claims and returns
- Keeping records will facilitate preparation of tax returns and in the event of an ATO audit record Keeping electronic records which can be reprinted are acceptable
