End of Financial Year is fast approaching, and at The Henry Wong Team® we normally field a whole bunch of questions about property and tax roundabouts now. One thing we need to clear up straight away is we aren’t financial advisors, so if you have queries related to your personal finances book in with a professional financial advisor for a chat.
We do, however, live and breathe real estate at all times of the year, so we’re in a position to answer a few questions and provide a bit of intel around property sales and EOFY. We’re putting together a few tax time tips below, which may help with your decision-making onselling your home in May or June. Let’s dive in.
Timing and Capital Gains Tax
Depending on your financial situation, whether you sell or not before EOFY will depend on Capital Gains Tax. CGT is the profits you pay on disposing of an asset, so if you sell a house and make a profit on it, you will pay tax on that profit.
Here’s what’s important to bear in mind: With a property transaction, there is a contract of sale that the seller and the buyer enter into. That contract represents a CGT event – so the date the contract is signed is the date the capital gains tax applies.
If you’re selling your home and you sign the contract on June 15th, the CGT will form part of that years tax return, even if settlement is in the next financial year. So the timing of your sale is something to bear in mind when you’re deciding to sell. What year would be preferable to have the CGT applied? Sit down with your accountant and have a good chat about that.
Mortgage Discharge Expenses
Some people are in a position where they will sell their house and use the proceeds to pay off their mortgage in full. If this is you, depending on your lender you’ll have to pay a mortgage discharge fee. These are designed to cover admin and paperwork costs. The good news is they CAN be claimed back on your next tax return. So make sure you keep a record of them!
Borrowing Expenses
What about other expenses related to taking out a home loan? This tip is for first-time buyers, people refinancing their homes and investors looking to get a mortgage on an investment property.
Many of the costs associated with taking out a home loan are tax deductible, including your broker fees, any valuation fees and any stamp duty paid on the mortgage (different to stamp duty paid on the property.) Keep track of them and present them to your accountant when it comes to tax return time.
Depreciation Vs Immediate Tax Deductions
Investors come to us with this question all the time, so this tip is definitely for them.
If they’re renovating their home or one of their investment properties, can they claim the costs back at the next tax return?
The answer is that with a renovation or adding new appliances to a home, the expenses are claimed back over a few years as depreciation. The depreciation is spread to cover the useful life of a renovation or appliance, so the entire renovation cost isn’t claimable as an immediate tax deduction.
What is claimable as an immediate deduction is minor repairs to a property. Things like broken taps and doors or holes in the wall that need patching up. If you get these repaired on an investment property before June 30th, you can claim their full cost as a tax deduction.
A Good Accountant is Worth Their Weight in Gold!
Property transactions are likely to be the biggest movements of money most people will make in their lifetime. You want to take as much care in the transaction as possible, particularly when it comes to your tax liabilities. A good accountant who knows your financial situation and the economic context in which you’re operating is a secret weapon. They’ll be able to guide you through the rules around deductions, and advise on your path towards selling your home.
Let’s Talk Brisbane Real Estate
The Henry Wong Team® is based on the southside of Brisbane, and we’ve been successfully selling property here for many years. We’re not just here to sell your home, we’re here to answer all your property-related questions. So get in touch if we can guide you in any way as we lead into the last weeks before EOFY. You can contact us here.
