EP. 1434 Naughty Tax Time for Landlords

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.

Episode Transcript

Speaker 1 (00:00):
now, all right.
Naughty people, naughtylandlords.
30 june is approaching andthere's things you should and
should not do when you're alandlord.
We're going to teach you thismorning with expert property
manager cleo.
Stay tuned, I'm the ringleader,so let's go Export.

(00:36):
Expert property manager ClaireRitchie.
How are you?

Speaker 2 (00:41):
I'm good, thank you.
I'm a bit of an export actually, now that you think about it.

Speaker 1 (00:46):
Yep export expert.
What's been happening thismorning?

Speaker 2 (00:50):
Oh, just mum life getting the kids ready.
It's cold, my 11-year-olddoesn't want to wake up so he's
still asleep, so he'll be righton the bell at 8.45 at school
this morning I would say butyeah, just getting ready for the
day.
I've got quite a lot on.
It's a busy time of year Junefor property managers, and there

(01:14):
are obviously the looming taxtime, 30th of June, questions
that come up from our landlordsand even our tradies as well.
So this is a very busy time forus property managers in real
estate.

Speaker 1 (01:32):
I'd imagine the tradies are getting all their
invoices in earlier than ever.

Speaker 2 (01:38):
Yeah, and especially this climate and every job's
important, but you still get theinvoices that are from like
February and January for some ofthem.
You're like, oh, I forgot aboutthis job and I now have to
remind the landlord again thatwe didn't pay for it in January
or February.
We're paying for it now, farout.

Speaker 1 (02:01):
And tell me you're working.
You know we're working withthousands of landlords at Novac.
I love talking with you becausenot only can you aggregate a
lot of people, but trends,what's happening, what they're
doing, what's a clever landlorddoing at the moment because of
tax time approaching on 30 June?

Speaker 2 (02:25):
At the moment.
What they are asking for is alltheir invoices, which are
normally attached.
They're checking all of thatout now and they're asking in
advance to the 30th of June ifthere's any upcoming work that
we might have had rollover as inmaintenance, not completed, and

(02:46):
they want it all tidied up forthe end of financial year.
So basically they will beasking for you know, that
plumbing job that wasoutstanding.
Can you make sure that that'sdone now, before you know the
30th, and having all of thatorganised, yeah?

Speaker 1 (03:05):
And for people that don't understand how this works
negative gearing in this countryis an incentive for landlords,
one of the few that's left over,and what happens is if you're
paying 40% tax or whatever youknow.
So depending on how much youearn is depending on the tax

(03:26):
percentage that you pay.
And say you're earning an xamount, you're paying 40 tax.
Now if you have a out, aninvoice for a thousand dollars,
you theoretically would get back40 of that in the next, at the
end of the financial year, afteryou've done your return.

(03:47):
So it's a, and that upgradestays with the property, that
$1,000 upgrade stays with theproperty, the property's worth
more, the property rents formore and then you've got a tax
deduction of, say, 40% if you'rein the 40 percentile of tax
paying.
So this is big, these arebig-ticket items for landlords.

Speaker 2 (04:12):
They are definitely paying.
So this is big, this, these arebig ticket items for landlords.
They are definitely and they dobudget that bathroom rental or
that kitchen or that thing.
You know that they've beensaving for um, and they do that
within the financial year.
So they plan for this when theyplan for the next one, um, as
you said, it's all an investment.
So, um, when you're negativelygearing these invoices and these
works carried out are importantas deductions and you know we

(04:38):
do tax depreciation schedulesfor our landlords we do
recommend a few companies andthey're really good at crunching
numbers and advising ourclients, especially if they've
bought new and off the plan.
You're, you know, probablybetter talking about that than
me, because I'm not the, youknow, I do basic maths.

(05:00):
I do understand it.
However, yeah, we do have allthese tools and all these people
that we have, you know, just adial away for our clients and we
send them all this informationcome tax time.
The consolidated rentalstatement we send at the end of
the year is gold.
It has everything in this onestatement for that entire

(05:23):
financial year all the outgoingsas in cancer, strataata water,
all the fees that they pay, themanagement fees, the outgoings
like the plumbing and electricalmaintenance.
It's all on the one statementand you just give that to your
accountant.
You don't have to go throughall your emails and your you

(05:44):
know personal scans andeverything.
So I feel that's probably theone of the most valuable
statements they'll receive eachyear, the landlords and they can
also say, wow, look, I got allthis rent in this year and I've
not really had to spend muchbecause it's all there in the
one statement.
Or I've spent a lot on this pass, on maintenance and things.

(06:06):
You know, maybe I should talkto my accountant, you know,
moving forward.
So, um, the statement is comingup now.
So on the 30th of june, ourlandlords will get that
statement.
Um, given there are a few thatdon't want it, that's fine.
Um, but yeah, we do spend a lotof time preparing for this um
statement coalition andeverything, like our accounts

(06:29):
people.
Um, it's a big job and it's abig job rolling it out every
year as well.

Speaker 1 (06:31):
This statement coalition and everything like
our accounts people, it's a bigjob, and it's a big job rolling
it out every year as well.
And tell me, it is a finiteline 30th of June for people you
don't know.
If you forget to pay somethingor you forget to claim something
, you are burning 30, 40, 46% ofthat amount.

(06:52):
So it is critical you don'tmiss 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 youraccount and you'll get charged.
You pick up your phone to yourproperty manager.
You won't get charged Ifsomeone rings you and not saying

(07:14):
you're an accountant, butyou're a good aggregator of what
people are doing.
What should a landlord beasking you when they call you?
Now's the perfect time becausethey can't call you two days
before 30th of June.
So now's the time to call yourproperty manager.
What should they be asking whenthey call you?

Speaker 2 (07:31):
That's a good question.
Thanks for putting me on thespot, Mark.

Speaker 1 (07:36):
Chat your BT.

Speaker 2 (07:39):
Well, I guess, when I will get my statement on the
30th or the next day or um, someof the tenants may not have
their rent cleared by that date,um, and that money will roll
over for the next, you know, thenext month.
So rent's another criticalthing.

(08:00):
Where is my tenant at?
Are they up to date?
Can you give them a bit of anudge?
It's end of financial year.
I really like this tidy um,especially if they're always,
like I know, five or six days inarrears.
So that's something you couldbe asking your property manager
just to obviously make sure.
I mean, we do that normally.
But if you want it all nice andtidy come tax time, that would

(08:23):
be also a question I'd be asking.
But yeah, look, it's not likeyou said.
It's not the end of the worldif everything hasn't been done
or collected by the 30th of june, but it does make that easier.
Um, you know, in coming this taxtime period, I do have clients
that are asking for their carpetand their reno to be done and

(08:47):
ready by the 30th of june.
So our handyman's under thepump with a couple of those.
So, um, I do have quite a fewmaintenance jobs that I'm
working on to to make sure thatdeadline is for the 30th.
So, um, those clients, that'stheir requests and that's what
we're going to aim to do, and wedo this every year come in,
come out.
So, um, yeah, we're we're wellaware of what we need to do.

Speaker 1 (09:13):
So I know it's a really, really understanding
silky smooth advanced landlordwhen they call me and say or
when they call our propertymanagers and say, can you not
pay my rent?

Speaker 2 (09:29):
Yeah.

Speaker 1 (09:31):
So what happens is that month of income.
There are landlords where wewithhold their money on their
request and we then give themtheir money the next financial
year one day later.
And the reason why is, you know, 10%, whatever it is 8% of
their.

(09:51):
It's 8% sort of less taxbecause they're pushing that
income into the next year.
Unfortunately, they've stillgot.
They've got to do that everyyear.
It's an advanced move less taxif you do that.
The other thing I've seenlandlords do is they call up
their bank and ask if they canpay one year in advance interest
.
It puts them ahead in tax by afortune.

(10:18):
They almost get a double taxclaim in interest for that year.
Problem is you, you got to dothat every year.
Uh, you know after that.
So there's little things thatyou can do.
There's some nuggets that we'vegiven you today you can take
away to put more money in yourback pocket yes, definitely.

Speaker 2 (10:37):
Um, you know, I think you guys posted only a few days
ago that that famous kerrypackard um clip where he's
talking about paying less tax.
And who would want to pay lesstax?
So my favorite youtube clip, itis it's gold yeah, and having
said that, I just did have aclient ask me to roll over the

(10:58):
rent because he's tenant paid 12months in advance and he's like
, can you not pay me that 67 000on the 30th?
I was like, no problem, there'slots of bills that need to be
paid there.

Speaker 1 (11:11):
There you go.
There you go, cleo.
Thank you so much.
Hopefully we help people outthere.
It is a.
I'm so glad you reminded us tobring up this topic today,
because you've hit it right onthe head with the timing.

Speaker 2 (11:28):
All good guys, and don't be afraid of tax time.
It's all good.
We're here to help you.

Speaker 1 (11:32):
Have a great day work it, work, it, work it.
See, you have a great day byeyou too.