There are a number of immediate deductions available to property investors, as well as items that can be depreciated over the life of the home. Australia’s taxation system offers generous concessions to investors and allows them to deduct the following:
The interest on a property investment loan is fully tax deductible. For this reason, many investors choose interest-only home loans. These loans allow investors to pay only the interest portion of the loan without making payments on the principal. This maximises investors’ tax deductible debt.
In addition to the interest on an investment loan, any accompanying bank charges are also deductible.
Any home and contents insurance, landlord’s insurance or other insurance related to the investment property is deductible.
Investors can deduct any ongoing repairs and maintenance of their investment property. Maintenance is any work carried out to prevent or fix deterioration, and can include things like gardening, plumbing or pest control.
Repairs are any works carried out to restore part of the property to its original state of function.
While repairs can be deducted during the tax year in which they occur, improvements to a property cannot. An improvement differs from a repair in that, while a repair restores an item to its original condition, an improvement alters the original condition. For more read our guide about repairs versus improvements.
Property investors can deduct costs pertaining to offering their property for rent. This includes any agent fees, ongoing property management fees and administrative costs. You can also deduct any outlay for advertising your property and travelling to and from the property.
Land taxes and council taxes are fully deductible.
In addition to expenses you can deduct for the tax year in which they occur, property investors can also depreciate assets within a property that decline in value over time. These include things like appliances, carpets, curtains and furniture. However, these must be items purchased by you rather than a previous owner.
Investors can also depreciate building construction costs for things such as major renovations or additions.
| Response | |
|---|---|
| 1 | 57.95% |
| 2 | 25% |
| 3 | 10.23% |
| 4 | 4.55% |
| 5 | 2.27% |
Negative gearing is one of the most attractive tax benefits for property investors. The policy is a tax minimisation strategy that allows investors to deduct losses on their rental property from their personal income.
The idea behind negative gearing is to offset cash flow losses in the short term with an eye toward long-term capital gains. This doesn’t mean, however, that negatively geared property investors have to be out-of-pocket at the end of the tax year. With depreciation factored in, a property can be cashflow positive but still be negatively geared.
Capital gains tax, or CGT, is tax paid on the sale of any asset on which you’ve made a profit. While CGT will only affect your tax bill when the property is sold, it’s helpful to understand how CGT is calculated so you can minimise your bill when you do decide to sell.
CGT on an investment property is calculated based on the sale price of the property minus what’s known as your cost base. The cost base of the property is the original purchase price, plus any expenses. Expenses for CGT purchases include the following:
Ownership costs include things like:
These include any capital works you’ve undertaken on the property.
Title costs are any fees associated with organising the title on your property.
These include legal fees, agent fees, advertising and marketing fees, and stamp duty.
In order to minimise the amount you pay in CGT, it’s important to keep very detailed records of all expenses related to your investment property. To see how to best minimise your CGT bill, read our guide to CGT on property.
If you’ve held the investment property longer than 12 months, you will be eligible for a 50% discount on the capital gains tax.
Major infrastructure upgrades are frequently associated with strong demand in local markets, as property investors often seek locations with infrastructure developments in the pipeline.
The FIRB has recently introduced new laws surrounding foreign investment along with new application fees and compliance policies.
If you're looking to invest in property, a line of credit loan could be a great way to leverage the equity in your existing property for a deposit. A home equity loan is a loan in which you put your property up as security to borrow against the equity of your home.
When you sell a rental investment property and make a profit, you will generally need to pay Capital Gains Tax. Some exemptions and discounts apply: here's how to work out how much CGT could cost you.
Learn about the key differences between investment and owner-occupier home loans and find the right type for your needs.
The property clock can help you determine the perfect time to buy and sell your investment, but how exactly does it work?
Buying property in a trust can offer tax benefits and excellent asset protection for investors. Here's how it works and some tips to bear in mind.
The laws around buying Australian property using a foreign income have recently changed, so here’s what you need to do to invest in Australian property.
Is the market downturn evidence of a housing bubble about to pop? We look at property data and expert commentary on Australia's housing market.