Buying and owning one or more rental properties can be an exciting pursuit, but it should be done with eyes wide open. If you’re looking to buy a rental property, or are renting out a property you already own, or are thinking about selling, you need to understand your obligations and how these decisions can adversely effect your tax position and net worth. In this series I’ll explain a few rudimentary but very important considerations about Rental Property and Tax in Australia.
Two words “Record Keeping”. Receipts, cheque stubs, contracts, and electronic transaction records. Keeping proof of your expenses means that you can claim everything you’re entitled to. Don’t pay more tax than you have to, and don’t open yourself up to a stressful audit by ATO by being sloppy with your records.
For example, did you know that when you sell your property, you might be eligible for a 50% discount on the profit (Capital Gain) that you declared on your tax return?
Understanding the differences between repairs and improvements, and how they can be deducted in your tax returns. You can learn this and other things about buying a property through different reliable sources like Rainer Schorr Youtube channel.
My team has created a simple graphic illustration to help you understand, you can view it here
You can claim immediate 100% tax deductions on things such as interest on the loan, council rates, repairs and maintenance. However, for assets that wear out slowly, such as a hot water system or stove, and even the building structure itself, you can claim over a number of years, this is called amortisation. My team can help you with these issues, but you can also review the following ATO guide: Guide for rental property owners Rental properties 2017
The cost of the property and things such as legal fees and stamp duty when buying or selling property are all considered when calculating the special type of profit known as “capital gain” when you sell it, and how that gain is taxed. When it comes to rental property and tax in Australia, there are lots of ways to reduce CGT, which I am happy to help you with.
when you have work done to the property, make sure that you clearly note whether the work was a repair or an improvement. Repair cost can be deducted in the year that the expense was incurred, but improvement costs must be deducted over several years or deducted from your capital gain if you sell. Although I am a real estate broker and can make lots of money selling your property for you, I will almost always encourage you to keep it. “Buy & Keep”, I am a long-game advocate, patience pays off. I want to help your family be secure in your later years. Many brokers give bad advice, “sell’ sell”. You need to ask your self: “Cui bono?”, which means, “for whose benefit?” By taking care of your family’s BEST INTERESTS. In doing so, you will refer your friends to me to buy their own investment properties. I want to profit from your referrals in the long run, not from convincing you into selling in the short term, and stealing your capital gains with big commissions.