Tax Tips Property Investment 2023

Here are some general tax tips which is recommended to be researched and understood by people engaged in property investment in Australia: 

Understand Negative Gearing: 

If your investment property expenses exceed the rental income, you can claim a tax deduction for the shortfall, known as negative gearing. The fundamental benefit of negative gearing is that any net rental loss incurred during a particular financial year may have eligibility of offset against other salary income and such for the year. Hence, it’s vital to understand the specific set of rules and regulations pertinent to this. 

Understand Capital Gains Tax (CGT): 

Understand the CGT implications when you sell your property is a crucial component of your investment property journey. CGT only applies to investment properties, not owner-occupied properties. If you hold the investment property for more than 12 months, you may be eligible for a 50% CGT discount. If you make a capital loss, you aren’t required to pay CGT and my use this loss to offset any capital gain in the future.

Claim Depreciation:

You can claim depreciation on the building and its various structures and fittings. It’s advisable to get a quantity surveyor’s depreciation report to ensure you’re claiming the correct depreciation amount over the life of your property. 

Claim Interest on your Investment Home Loan:

As a property investor, you may be able to claim all interest paid on your mortgage as tax deductible. Further deductions may include offset account fees, withdrawal fees for redraw facilities and loan maintenance fees etc. In case you have an interest only home loan, you’ll be able to claim all your interest only payments.

Claim Repair & Maintenance expenses:

Repairs and maintenances are inevitable in investment property journey. Luckily for the property investors, most of the repair expenses are tax deductible. To be eligible for deduction on the eye of tax authorities, any damage must be fixed by restoring the item/feature to its original condition. Also, maintenance expenses incurred to preserve the liveable condition of the property are tax deductible.

Claim Strata fees, council rates:

If your investment property is under a strata title, strata fees or commonly referred as body corporate fees will count as a deduction along with council/shire rates, utility bills such as water, electricity, gas and so on. 

Claim Other deductions:

Below are the list of potential deductions for your investment property:

• Land tax
• Pest control costs, cleaning, gardening
• Some legal fees
• Stationery
• Some travel costs.
• Tenant advertisement fees including photograph and online listing.

Tax on Rental Income:

Rental income is taxable in Australia like any other types of income. The Australian Taxation Office (ATO) requires that any rental income you receive forms part of your assessable income. Investors should declare their rental income in the tax return. Tax on rental income is typically the same rate as marginal tax rate for that year. Deductions can be claimed for any costs associated with earning the rental income.

Detailed Record-keeping:

It is highly recommended to maintain comprehensive records of all your expenses related to the property. This includes maintenance costs, property management fees, insurance, and interest on loans and so on. A good record-keeping can help maximize your deductions.

Consider Structure:

Depending on your circumstances, you might want to consider the ownership structure of your property. This could include owning the property in your own name, through a trust, or a self-managed superannuation fund (SMSF). Each structure has different tax implications.

Seek Professional Advice:

Tax laws can be complex. Consider consulting a tax professional or tax accountant with expertise in property investment Tax to ensure you’re maximizing your deductions while staying compliant with the latest regulations. Stay updated with any changes in tax laws and regulations related to property investment in Australia. Tax laws can change, affecting how you manage your investments. Remember, it’s crucial to tailor your approach to your specific situation. Always seek advice from a qualified professional to ensure you’re making the most of your property investment while complying with the law.

To find out more on how it can be tailored to your personal circumstances, please schedule an appointment with one of our experienced tax accountants / tax advisors / tax agents or mortgage brokers by calling us on 08-9386 0047.