Property Advisory

Property Advisory

1. Income from rent on an investment property is subject to income tax, and expenses such as mortgage interest, property management fees, repairs, and maintenance can be claimed as deductions.
2. If the expenses of owning the property exceed the income generated, the property may be negatively geared, and the property owner may be able to claim a tax loss.
3. If the income generated exceeds the expenses of owning the property, the property may be positively geared, and the property owner will need to pay tax on the net rental income.
4. A capital gain is the difference between your cost base (cost of ownership) and your capital proceeds (what you receive when you sell the property or the market value when you transfer the property).
5. Capital gains tax may be applicable when the property is sold, but if the property is held for more than 12 months, there is a 50% discount on the capital gains tax.  If you make a capital loss, this loss will be deductible only against other capital gains.  This capital loss can be carried forward for any future capital gains.
6. Property owners may be able to claim depreciation on the building and any plant and equipment items included in the purchase price.
7. Keep records of all expenses and get your expenses right:
   • Eligibility – Claim only for expenses incurred for the period your property was rented or when you were actively trying to rent the property on commercial terms.
   • Timing – Some expenses must be claimed over a number of years.
   • Apportionment – Apportion your claim where your property was rented out for part of the year or only part of your property was rented out, where you used the property yourself or rented it below market rates. You must also apportion in line with your ownership interest.
8. Getting record keeping right makes tax time easy at each step of your investment journey.
   • Buying
     • Contract of purchase
     • Conveyancing documents
     • Loan documents
     • Costs to buy the property
     • Borrowing expenses
   • Owning
     • Proof of earned rental income
     • All your expenses
     • Periods of private use by you or your friends
     • Periods the property is used as your main residence
     • Loan documents if you refinance your property
     • Efforts to rent the property out
     • Capital improvements
   • Selling
     • Contract of sale
     • Conveyancing documents
     • Sale of property fees
     • Calculation of capital gain or loss

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