Look beyond the obvious when calculating tax deductions
Tax deductions can be concealed behind walls, in ceilings, under floors and on roofs – the combined value of which can...
One of the most important part of a good journey in property investing is an effective financial team that will guide the investor towards the right decision, making the most out of his hard-earned assets. How can a tax accountant be helpful in an investor’s journey?
Together with Smart Property Investment's Phil Tarrant, Rich Harvey of buyer’s agency Propertybuyer answers one of the most frequently asked questions about property investment:
Do investors need a good tax accountant?
Rich Harvey: I’d say absolutely yes. I think, you know, I always use this line, ‘You don’t know what you don’t know.’ If you want to be an expert in tax law, go ahead and you’ll get insomnia reading the tax act. I definitely think you need a good accountant.
What should they look for in an accountant?
Rich Harvey: You’ve got to find one that regularly works with property investors, that’s a key. One that understands the ins and outs and the benefits of tax law around property investment.
Find also one that obviously sticks within the tax law and is not too aggressive in terms of their structures and their approach, and one that just gives you a tailored solution for your own individual circumstances. You don’t just want an off-the-shelf accountant that has just one solution for everyone. It is very much a tailored solution. So find someone that’s got experience and ask.
Phil Tarrant: I’m pro advice, so I don’t proclaim to be an expert in property investment, but I’m pretty smart and understanding that I need people to help me create wealth through property. So from absolute get-go, I said, I need to get people to help me out, and they are a good accountant, a good mortgage broker and a good buyer’s agent. All these guys are property investors and they get it.
Should investors try to get everything and anything they can back through their accountants? Or is it more important to find someone who really knows property?
Phil Tarrant: It’s a much bigger question than that. It’s about an accountant understanding what you’re trying to do by investing in property. Obviously, it’s a wealth creation tool, investing in property. I’ll speak anecdotally, a lot of accountants will be looking at how to maximise your tax return as much as possible. Or if you’re self-employed, trying to pay as little tax as possible. Obviously, that all needs to happen within the confines of the law.
But if you’re looking to drive down your income and not show profitability in the business, that’s really going to impact your ability to borrow. So as a property investor, what do you need? You need to be able to borrow money. How do you borrow money? Well, you need to be able to show to the bank that you can service a mortgage. Now, if you can’t do that, it’s going to essentially hamstring yourself rapidly in terms of investing in property moving forward. So, specifically with an accountant, you need to actually get an accountant who understands what you’re trying to achieve that has a strategic view on this and not just be a compliance operator. They need to go be an adviser.
Rich Harvey: That’s right. They’ve got to look at the structure, it’s not just about tax minimisation. It’s about getting the right structure in place. And as Phil said, you’ve got to prove serviceability. Serviceability to the banks is gold. That enables you to then buy more properties and grow your wealth. That’s a really key thing.
Tune in to The Smart Property Investment Show’s Q&A session to know more about building a financial team, investing in trust structure and other wealth creation efforts.