3 reasons to sell before the EOFY
Should I sell or should I hold? Choosing the right time to put an investment property on the market is critical to reaping maximum financial benefits. With the end of the financial year (EOFY) fast approaching now is the time to get your house on the market. If you are unsure if it is worth it right now, read on to learn the top 3 reasons to sell before the EOFY.
1. Capital Gains Tax (CGT) won’t be due until 2021/2022
Financial advisers say, ideally, your property sells in mid to late June. As the settlement normally takes around 4 weeks, you won’t have settled until the new financial year. The good thing about it? The CGT won’t be due until the next tax return 2021/2022. That means you do not have to pay the average $35,000 for up to 12 months. This is a whole year to increase deductions on the amount.
Of course, it is crucial to track every single cent you spent on your investment property. But let’s face it, few really do. When selling your property in June, you have a whole year to find and file all these receipts that prove the cost of the purchase and of maintaining the property. Be pedantic, you can recover significant amounts of money related to the property purchase, starting, according to the Australian Tax Office, with the stamp duty you paid for the house. A rule of thumb is if an expense was not tax-deductible it is worth checking if it offsets CGT. All costs associated with getting an investment property lettable for the first time could reduce your CGT bill; for example the cost for the initial clean of a property.
2. Get your money back right away
While the CGT is not due for another year, your selling expenses are tax-deductible right away. Yes, that is right, you can deduct the costs in the financial year in which they occurred even though you don’t need to pay your bill to the ATO yet. So what are the costs that you can claim back straight away? You can tax deduct the commission for the real-estate agent and the marketing fees for listing your property too. More importantly, you also get all the money back that you spent to get your house ready for sale.
Expenses to prepare an investment property for sale are: Painting the house, revamping the kitchen, a facelift for the garden, and street appeal… All the small and big expenses that you forked out to get a better price do add up to between $2,000 and $15,000. And all this money you get back straight away.
Claim back all the money spent on renovations
Say you decided to give your kitchen a facelift (#one investment when selling a house). You pay around about $3000 to get all the cabinetry to look brand new. You update the tapware; added an extra bit of storage and put in a new stone benchtop for another $1,500. This is without any doubt money well spent as you can expect to increase the price for your property by at least $15,000. However it hurts to be $5,000 out of pocket, doesn’t it? Well, the pain should be very short-lived if you do it right: update your house in May, sell it in June, and claim the expenses back in your tax return on the 1st of July. Winning.
Real estate agents estimate that, when done right, you get at least four times your investments back in the sales price. So $ 5,000 spent will earn you an extra $20,000 on the purchase price. To learn more about how to renovate your investment property for profit, click here.
3. Claim depreciation for the whole year – instantly
Real Estate.com.au explains “property depreciation is a tax break that allows investors to offset their investment property’s decline in value from their taxable income.” Under the Aussi tax rule, every investor can claim the decline in value of the building’s structure and permanently fixed items and equipment in his annual tax bill. Depending on your method of depreciation your tax deduction could add up to $3,000 – $4,000. The good news: You can claim the whole amount for this tax year even if you just sold your house.
You have learned the 3 reasons to sell before the EOFY and now, knowing that timing is crucial for your exit strategy, make sure to get your property on the market asap. Give us a call on 0893032176 or click here to book an obligation-free consultation now and your house can be ready to go on the market in less than 4 weeks.