Investment property tax tips

Thursday, 12th February 2015

There are a number of key tax advantages to those investing in property, including negative gearing and rental property expense claims.

We have talked a lot about negative gearing over the past 12 months and it is worth coming back to given its importance in property investing. Negative gearing is when the cost of investing is higher than the return you achieve.

Or another way of looking at this would be, when your annual net income is less than the interest you are paying on your investment property loan plus deductible expenses such as property management fees and repairs.

You then deduct the cost of holding your investment property from your overall income. This then reduces your tax bill and this is the part that people find attractive.

Now lets look at the rental property expense claims and how they impact your tax position.

The expenses you can claim as tax deductions include those that are related to your mortgage, on going management and maintenance costs and the depreciation costs which are especially attractive in newer properties.

The list of expenses you can claim and those you can’t are nicely outlined in the article Investment property tax tips on Domain.

An important tax tip to note is that if you sell your investment property you are likely to incur a capital gains tax. However if you hold your investment property for more than 12 months the rate at which capital gains tax is charged will be cut by 50%.

Look out for our future articles on neutral and positive gearing.

If you would like to know more about investment properties and your tax position please contact me