re: Tax return, question after purchasing IP

Hi everyone,
We settled our 1st IP this year in April and anticipate OTP property loan coming up in July.

We usually do our own tax returns but thought of getting a accountant to do our tax returns this year.

Our reasoning have been with a loan on the IP(slightly negative), we could reduce taxable income and get a bit of tax returns in the end.

The accountant worked out the tax return to be significantly less, infact just the right amount to pay for using the accountant's service.

Reason provided was, the goal for the returns is not to extract the maximum amount as yet, its actually to give you a higher income as we have a pending loan which need to be completed next year.

So since we have a significant loan coming up next year, it is better to show you are paying more tax (?)

What I am trying to understand is,do banks use this a significant parameter?
If that is the case, what if my partner had to take a couple of months off work when we had to go for the loan? Will the bank be more lenient and look at our tax returns more favorably?

Confused.

 

It depends if you are self-employed or PAYG. If you are PAYG the banks will generally accept income from your payslips and property manager statements (for rental income), and therefore won't have to look to your tax return. Even if you are self-employed they will still normally take 75-80% of rental from property manager statements for servicing.

If you are relying on income from a business (which it sounds like you aren't) then showing more income from the business (and therefore paying more tax!) will increase your borrowing power.

 

Thanks Simone.

No we both are PAYG and don't rely on other sources of income.
We are confused to go ahead with this accountant or not?
Thoughts?

 

It sounds like they may be getting confused between reducing income for business owners, and property investors.

But without knowing more about your situation I would hate to give you the wrong advice, do you have a broker/banker you normally deal with? Might be worth having a chat to someone to confirm that increasing your deductions won't hurt your borrowing power.

 

Sounds like a crap accountant to be honest!!!

A great accountant is worth their weight in gold!

 

Thanks Simone.
Will get some insight from broker who I used for 1st IP