Book keeping tips for property investors

Many investors are savvy buyers and ensure they surround themselves with an expert team, however often their bookkeeping skills aren’t the best and they end up missing out on hundreds of dollars’ worth of claimable expenses.

Here are some valuable tips we have learnt over the years that will help ensure you are managing your investment efficiently and claiming all possible expenses.

Create a digital filing system

As an investor you undoubtedly have loads of information that comes through to you each financial year that you need to save. From your yearly rent and expense summary from your property manager, quantity surveyor reports, receipts of legal fees, scrapping schedules and more, having a digital filing system in place to manage this information will save you loads of time and effort.

To do this, scan or photograph all your paper receipts and download and save any digital receipts into a special investment folder on your computer.  Of course make sure you create a backup just in case.  It will make it so much easier to find come tax time if you do this.  Whilst you don’t need to provide the physical tax receipts, make sure you keep them on file in case you are audited by the ATO.

In addition to this, create an excel spreadsheet to track all of your expenses.  Include the date, what the item is, what it was for, the cost and a running total.

Important documentation for tax time

It’s a good idea to talk to your accountant about what documentation the ATO requires you to keep to support your tax return and claims.  A safe suggestion is to keep all your receipts even if they are small as it doesn’t take long for these to these expense to add up.  Your accountant is the best person to determine what is claimable and what is not so provide all this information to them.  Be careful not to lose any receipts as misplacing them may mean you show a higher capital gains and therefore tax relating to it.

In addition to tax receipts keep a logbook for any travel/car expenses relating to your investment property, and a documented / diarised account of any inspection trips to the property/s.  Make sure you include the reason for the visit and the date.

Investment expenses and how to pay

A good way to ensure you keep a track of your expenses is to avoid paying any expenses out of your own pocket.  It is better to have your property manager pay for any property related expenses from the rent they collect from your tenants.  If you can’t avoid paying something yourself keep a summary of what you have paid on page and give this to your accountant. 

Documents needed for your accountant

Either keep your monthly rental statements and invoices from your property manager, or ask them to provide you with a yearly summary of your property detailing rent received and expenses paid on your behalf. This summary must be given to your accountant.

If you renovated your investment, ensure you get a Quantity Surveyor to provide you with a Scrapping Schedule or talk to your LJ Hooker Property Manager as we a have a corporate relationship with BMT Tax Depreciation Specialist and they too can help.  You want to make sure you are claiming all relevant tax deductions for old fixtures and fittings that were thrown out.

Also ask your Quantity Surveyor for a Deprecation Schedule as this enables you to claim the lowering in value of add-ons within your property, or the property itself, which can be a great way to minimize your tax expenses and to maximize your return on investment.

In addition, make sure you get a loan statement from your lender and provide this to your accountant so they can calculate the interest paid on your loans.

Skill up

The majority of investors don’t have an accounting background so it is important that you consult your accountant and financial advisor before making any investment decisions.  It is also important that you regularly ask your accountant about any changes to investment laws that may affect you. Of course do your own reading via newsletters, the ATO website and online journals to ensure you are constantly improving your strategy and knowledge.