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  • What tax benefits can I get from investing in property?

  • What tax benefits can I get from investing in property?

    Investing in bricks & mortar may offer a variety of tax benefits, both immediate and longer term. As this table shows, many different types of expenses can be tax deductible while you hold the property as an investment.

    Type of expense Example When can you claim a tax deduction?
    Interest on a loan Buying a rental house or unit

    Buying land to build a rental

    Buying a depreciating asset for the investment, like an air conditioner

    Financing renovations or improvements

    Same tax year
    Repairs and maintenance Replacing part of the guttering or windows damaged in a storm

    Replacing part of a damaged fence

    Repairing an electrical appliance

    Same tax year
    Tenancy costs Preparing a lease agreement

    Evicting a tenant

    Same tax year
    Structural improvements Adding a room

    Building a retaining wall or fence

    Over a number of years
    Assets that are part of the investment Stoves

    Air conditioners

    Hot water systems

    Over a number of years
    Borrowing costs Stamp duty charged on a mortgage

    Loan establishment fees

    Title search fees charged by the lender

    Depends on the amount:

    ·        less than $100 can be deducted immediately

    ·        larger amounts are deductible over five years or over the term of the loan, whichever is less

    This table is for illustrative purposes only. It’s not exhaustive and is subject to change. To make sure, you don’t miss anything, talk to your tax adviser about how to claim the correct tax deductions.

    What happens when you sell your investment property?

    Many investors focus on the positive impact of tax deductions when deciding whether to invest in bricks & mortar. However, it’s important to remember the potential impact of the capital gains tax.

    If you bought an investment on or after 20 September 1985 and you then sell it at a later date. Then you may be liable for capital gains tax if you sell it for more than you paid to buy it.

    You can also make a capital gain or loss from some capital improvements made since 20 September 1985 to a home or unit you acquired before that date.

    To work out whether you have made a capital gain on your investment, visit the ATO website or speak to your tax adviser.


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