Owning an investment property in Australia offers great potential for income, but it also comes with specific tax obligations and entitlements. Here are some essential tax-smart tips to help you navigate the financial landscape of property investment.
Record Keeping Makes Tax Time Easier
Keeping thorough records from the beginning can save you a lot of hassle and ensure you maximize your deductions and entitlements. Here's what to keep track of:
Buying: Keep records such as the contract of purchase, settlement statement, conveyancing documents, loan documents, and any costs associated with buying the property.
Owning: Maintain proof of rental income, all expenses, periods of private use, loan documents, capital improvements, and depreciating assets.
Selling: Keep the contract of sale, conveyancing documents, sale fees, and calculations of your capital gain or loss.
- Preparing Your Tax Return
When it comes to preparing your tax return, remember these three key steps:
Include All Income: Report all rental income for the year, including short-term rentals, shared spaces, insurance payouts, and rental bond money.
Get Your Expenses Right: Only claim expenses directly connected to earning income. Some expenses need to be spread over several years, and you must apportion expenses if the property wasn't rented out for the full year.
Keep Records to Prove It All: Ensure you have records for all income, expenses, purchase, and sale of the property. - Selling Your Property
When you sell an investment property, consider the following tax implications:
You might be required to pay capital gains tax (CGT). If you transfer the property below market value, CGT is based on market value.
If your costs exceed your proceeds, you can report a capital loss to offset future gains.
Calculate the cost base accurately, excluding deductions for improvements and depreciation.
If you lived in the property before renting it, consider your eligibility for a partial main residence exemption.
Owning the property for more than 12 months might entitle you to a 50% CGT discount as an Australian resident.
How We Can Help
Navigating the complexities of tax and property investment can be challenging. Our financial services are here to provide expert guidance and support. Whether you need assistance with:
- Setting up a comprehensive record-keeping system
- Identifying and claiming all eligible deductions
- Accurately reporting rental income and expenses
- Strategizing for capital gains tax when selling your property
We’re here to help you maximise your investment. Contact us today at 02 8318 1545 or schedule a consultation to our live calendar and learn how we can tailor our services to meet your unique needs.
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