Property investment is a popular method of wealth creation for many Australians. But come tax time, some property investors miss out on valuable tax deductions. The good news is that with a little research and good record keeping, tax time need not be a perilous experience.
Here we look at some of the tax implications of owning an investment property. If you own an investment property, renting out part, or all of it; making improvements or repairs could affect your tax. And when it comes to renting out your investment property, there are many items you can claim for, such as rates, interest, insurance, real estate agent management fees, depreciation and capital works. Some costs are tax deductible in the year you incur them, whereas others can be used to reduce your profit, or ‘capital gain’ – the difference between what it cost you to get, maintain and improve the property and what you receive when you sell.
When it comes time to submitting paperwork at tax time, good record keeping will help ensure you don’t leave out any relevant deductions. It may also help you avoid untimely errors. Should you decide to sell down the track, headache-free paperwork will help streamline the process of calculating your capital gain or loss. Everyone’s personal financial circumstances are different, so discuss the tax implications of your individual property investment strategy with a licensed financial advisor and/or accountant.
Did you know…
- If you have owned your property for more than 12 months, you may be able to reduce your capital gain
- If you transfer your property into someone else’s name, you may still have to pay capital gains tax
- You need to keep appropriate records for capital gains or losses for 5 years
- It is also a good strategy to have a Tax Depreciation Schedule drawn up. This is a tool used to assist many property investors achieve maximum return on their investment. Mortgage Choice is now offering Tax Depreciation Schedules through Real Property Matters, whose team of Quantity Surveyors and Cost Consultants have extensive industry knowledge in cost estimating and planning.
For more information contact Richard Windeyer on 1800 01 LOAN or click here to "Book a Meeting"