In Australia, all income earned by individuals needs to be taxed. However, investment properties can enjoy tax benefits for various expenses of the property, so many people choose to buy investment properties to reasonably offset tax.
What Income is Subject to Tax?
The main part to be taxed is the rental income. If your rental income is greater than the property expenses, it is called positive gearing and needs to be taxed. If the rental income is less than the property expenses, it is called negative gearing, and you can use the loss to offset other income like your salary.
What Expenses Can be Tax Deductible?
The largest part of investment property expense could be the investment property loan expense. These include loan application fees, assessment fees, loan interest, monthly fees, lender mortgage insurance, etc.
Other expenses are the daily expenses of the property, including the following expenses:
1. Advertising for tenants at the time of leasing;
2. Body corporate fees and charges;
3. Property agent fees and commissions;
4. House depreciation. In Australia, the depreciation cycle is 40 years, and the property depreciation report usually needs professionals to prepare. If it is prepared and paid before the end of each financial year, the expenses of making the property depreciation report itself can also be fully refunded as part of the depreciation tax credit;
5. Property insurance;
6. Land tax;
7. Council fee;
8. Water charge: It refers to the part paid by the landlord for the investment property, and the part paid by the tenant cannot be used for deduction;
9. Daily maintenance fee: including cleaning fee, gardening and lawn mowing, pest control, house maintenance and repairs;
10. Legal fees: In particular, the solicitor's fees incurred during the management of the investment house can be deducted from tax, and the solicitor's fees incurred during the purchase and sale of the house are not included in this item;
Tax Refund Method for Investment Property
You can get the tax refund at the end of the financial year, when you go to your accountant to file a tax return.
Therefore, please keep the invoices of all expenses properly in ordinary times, and seek advice from an experienced accountant to make the most of your investment property tax returns.
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