Investment Property Tax
Property is a popular form of investment as it offers stability, simplicity and the strong likelihood of good returns, especially in a strong housing market such as Sydney´s. There are also a variety of taxation options available that can help you maximise your income from property investment.
Deductions and Depreciation
There is a wide range of expenses associated with property that can be claimed as a tax deduction from your overall income. This can include items such as insurance, maintenance and council rates. You can also claim for depreciation on the property´s furnishings, appliances and any systems that are installed in the premises such as air conditioning.
Capital Gains Tax
This is the tax that is incurred on the sale of an asset, for example, property or goodwill. It applies to the difference between its original purchase price and its sale price – in other words, to the profit. However, there are circumstances which can reduce or minimise this tax, and different decisions about how to use your property have different tax implications.
This is a property purchase strategy in which you use debt to minimise your income tax. It works like this: you take out a loan to buy a property. The rent you receive for the property, which is counted as income by the taxation department, ends up being less than you pay in interest on your loan. This difference is recorded as an annual loss and deducted from your annual income, which reduces the amount of income tax you pay for that year.
There is some risk involved, however, as it depends on you being able to sell the property at a good profit. If you hold on to the property for over a year after the original purchase, you can reduce the amount of capital gains tax you pay as well.
Though this strategy offers great tax benefits, you should seek professional advice before taking this course.
At Gotsis Accounting, we give thorough and professional advice on all property tax matters and tailor our recommendations to suit your situation. If you´d like to find out more about how we can help you, give us a call or come in and see us at our office in Five Dock, Sydney.