Why should I use an accountant?
Many investors think they can travel the long and winding path to financial independence alone. But the reality is, everyone needs a bit of guidance and advice along the way, if only to stop you from getting lost. An accountant is just one fount of knowledge (alongside your Authorised Financial Adviser) that you should make use of when investing in residential property, and here's why.
Keep in line
Accountants can say they're in a good news, bad news business. Good news – you've made money. Bad news – here's the tax bill. But they're not around just for shuffling your paperwork. Whatever news they bring, a good accountant can help you keep out of trouble with the tax authorities and give you a reality check when you need it. Look for a chartered accountant, too. They have professional development and ethics requirements, as well as insurance.
For property investors there seems to be a moving playing field as the government and Reserve Bank respond to the white-hot Auckland market. The Loss Attributing Qualifying Company (LAQC) was stopped and replaced with the Look Through Company (LTC). Claims on building depreciation were stopped. And now there's the 'bright line' test.
Even without these changes property investors need to make sure they don't fall foul of the rules that could make them traders, or just caught by 'bought with intent to sell' rules.
A bit confused? That's why you should get an accountant on your team.
Think of them like a referee. They'll run along in the background, keeping an eye on things, but will quickly alert you if something isn't right. For instance, they can make sure you claim the expenses you should – and stay away from those you shouldn't. They'll make sure you file your tax return on time, and send you reminders when you need to pay tax. What's more, they can help you deal with the implications of not being able to pay tax when it's due or if you forgot to pay it.
And that's not all. They can help you decide what is the best structure to own your property investments in: Standard company? LTC? Trust? Partnership? Sole Trader? Confused again? See an accountant!
Here's to your financial independence!
Authorised Financial Adviser / Investment Property Expert
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