Looking to negotiate a better deal on your current investment portfolio or to purchase your first investment property?
Property Investment Plan
A good idea for any property investor is to first put together a plan. This might include thoughts about what you want to achieve. With a plan in place you can accurately measure your progress. It is also a good idea to understand what other goals you have in life and how property investment might affect with these ambitions.
Property Investment Tax Considerations
Some property related expenses are tax deductible. This might include the interest you pay on the home, repairs and maintenance and insurance costs for example. For information on the tax treatment of property investment visit the Australian Tax Office: rental property expenses page.
Property Investment Positive Gearing
A positive geared property means that the income you receive from your investment property (rent) is greater than all of the expenses associated with it. Expenses include interest, council rates, property management and repairs and maintenance.
Property Investment Negative Gearing
When the income earned from an investment property (rent) is less than all of the expenses associated with it, owners of the investment property need to make up the difference from other sources of income. The loss on the property investment can reduce the tax payable on the owner’s other income. This strategy is referred to as negative gearing. The plan for the investor is generally that the property will increase in value to compensate for the negative gearing effect.
|Property Investment Expenses to Consider
The expenses related to property investment might include:
|Property Investment Depreciation
For investment property items such as furniture and some appliances, you can claim a depreciation deduction. This is done by writing off the cost of the item over a set number of years (effective life). The Australian Tax Office has prepared schedules which set out what it considers to be an appropriate effective life for various assets. It may be a good idea to talk with a quantity surveyor or accountant to make full use of the deductions. For information on the tax treatment of property investment visit the ATO Deduction for decline in value of depreciating assets – property investment
Property Investment Landlord Insurance
Landlord insurance protects your rental property against damage covered within the insurance policy terms, like fire ,theft or storm. Additional options are often available that include protection for loss of rental income or malicious damage to the property due to the tenant.
Property Investment Ownership Structure
There are many different ways to own an investment property. You should get advice from your accountant or lawyer before deciding which structure would be suit your plan or goals.
Individual or joint ownership: If you buy an investment property in your own name or in joint names; rental income and expenses are added to your personal income for tax purposes. For information on the tax treatment of property investment visit the Australian Tax Office: rental property expenses page.
Trusts: A trust can make it easier to share the income received from property investment to the beneficiaries of the trust such as other people within your family. A trust deed would need to be prepared and the trust will have a separate tax return adding to the accounting expenses of the property investment.
Company: A company can be established to purchase an investment property. The rental property is owned by the company and income and expenses are accounted for in the companies tax return. Further information about starting a company can be found at ASIC Starting a company.