Investment Property Tax Tips in Australia

Property Tax is any tax that can be levied on an owner of property. Taxes on the transfer of property rights are known as Transfer Taxes. This can be a percentage of the property value or it can be calculated based on a fixed amount that is determined by the individual state.

As a property investor, it is imperative to make smart decisions that will give you favourable tax conditions. We will go through some of these tips that will help you with your property taxes.

Capital Gains Tax

An appreciation in the value of an asset held for more than 12 months will be taxed as income.

You should remember that this includes selling your main residence even after it is transferred to another person’s name. Capital gains amount is the difference between the cost of ownership and the final sale price.

An appreciation in the value of an asset will be taxed as income.

Tax Returns Lodgement 

If you own rental property, there are 3 critical steps that you should always bear in mind when submitting tax returns:

1. Declare all income received: This includes submitting a schedule of payments received against the property

2. Claim all deductible expenses: This can include cases where you have paid interest on your home loan but also other costs such as repairs and maintenance of the property, water usage, council rates, etc.

3. Have proper records: keep records of all income and expenses to reduce the possibility of making mistakes

If you are using rental property as an investment, this is also the season where it is compulsory for landlords to submit their tax returns. 

Property investors can benefit from submitting proper tax returns because they often have different deductions that come with owning a particular property. This means that you can get a discount by reducing the taxable income.

Importance of Proper Record-Keeping for Rental Property

The tax office has been cracking down on property investors who have not been properly submitting their tax returns. This is due to a rise in the number of cases where people have not been claiming rental income and have not been declaring that they are landlords. 

This often happens when a person does not expect that they will be audited or if they think that the tax office will not find out. However, this is not always true because self-employed individuals are being audited more often than before.

You should know that it is important to keep proper records to prove your claims and also show that you have been paying the correct amount of taxes for your property. This information can be used as supporting documentation when reporting your taxable income.

Some of the information that should be kept in record-keeping includes:

  • All receipts and invoices for repairs and maintenance on the property
  • All bank statements related to rental payments, including interest earned on lenders accounts
  • When you buy the property, all purchase documents can be used as supporting documentation

Accurate Business & Accounting Services is a professional firm that can answer all your questions and provide more tips on property taxes

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    Bonus Tips:

    1. Prepayment of next year’s interest in advance to tax advantage.
    2. Many tax payers miss out on claiming mortgage insurance paid on loan with more than 80% LVR. It is classified as borrowing expenses. This is sometimes a substantial amount. An average mortgage insurance on a $750,000 loan can range from $5000 to $15000. This expenses is claimed over 5 years. Mortgage insurance can also be claimed when refinancing the loan.
    3. Get a depreciation schedule prepared from a professional to maximise claim on fixtures and fittings.
    4. In certain states of Australia stamp duty paid on purchase of property can also be claimed while negative gearing which is a major amount to boosts the tax refund substantially.