There are 10 major tax considerations before you buy your next investment property.
Blogger: Shukri Barbara, Property Tax Specialists
1. Get professional advice before signing the contract - there may be a better ownership structure. Ask the question - in whose name should the property be in?
2. Land Tax implication - Threshold can effectively be extended from where investment property is in different names instead of joint names
3. Look at your risk profile - is asset protection necessary?
4. Negative gearing in the name of someone with high income may result in a saving of tax But on sale the capital gains may be taxed at the higher rates – consider timing of when to sell to minimise CGT
5. Using your home as security for negatively gearing into an investment property which does not perform and allows the negative to be compounded in a line of credit will risk your home and ability to repay in the long term
6. A depreciation report from a Quantity Surveyor will help increase the deductions against rental income and save some tax while rented
7. Cost of repairs undertaken immediately after purchase of a property is considered part of the cost base and will not be tax deductible. Order the Depreciation report after the repairs
8. Major repairs are considered renovations, forming part of the cost base. as a rule of thumb, if it is stock on the wall or the floor it is part of cost base. If it restores functionality, it is a repair
9. 50% discount on capital gains for property owned for longer than 12 months is NOT available for non-residents (for Australian tax purposes)
10. Property wealth seminars attendance fees are allowed as a tax deduction only when the topics relate to improving rental income or reducing rental expenses. It is not deductible where the discussion is on creating wealth through investments in property. An apportionment is possible where the both are being discussed
About Shukri Barbara
Shukri Barbara is a CPA with over 30 years experience in public practice and professional associations support service. He is a Certified Practising Accountant and a Chartered Tax Adviser, as well as Principal Adviser at Property Tax Specialists.
He is also a regular columnist in Smart Property Investment magazine.
DISCLAIMER: The above is to be considered as general education. This is not advice and it is not to be acted upon without professional advice from a qualified professional who understands your personal circumstances.