As the end of June rolls around, it signals the close of the 2023-2024 financial year. For many, this might just seem like another date on the calendar, but for savvy investors, it’s the perfect time to spot new opportunities. Yes, it’s tax return season—initially not very thrilling, but the information in these documents can significantly impact your borrowing power, potentially by hundreds of thousands of dollars.
When filing tax returns, accountants typically focus on being tax-efficient, aiming to reduce your taxable income as much as possible. However, this approach can hurt your borrowing capacity. If you’re self-employed, banks and lenders look at your tax returns to assess your income. To boost your borrowing power, it’s crucial to show as much income or profit as you can. This might mean paying a bit more in taxes this year, but it will increase your borrowing capacity and open up more investment opportunities.
Some professions often leave out parts of their revenue to lower taxable income, which can help in the short term by reducing taxes and keeping more cash on hand. But this strategy can seriously limit your borrowing power. It’s important to understand these ramifications and consider them when preparing your tax returns.
This end of financial year is particularly special because new tax cuts are coming into effect. These cuts will immediately boost the borrowing power for everyone, no matter their job. This creates new investment opportunities, whether you’re looking to refinance for a better rate or add another property to your portfolio.
Before you file your tax returns, consider talking to your property wealth planner and accountant. Discuss how to optimise your tax returns to maximise your borrowing power. By taking these proactive steps, you can make the most of your investment potential and set yourself up for strong long-term success.