5 Vital Tax Tips For Melbourne Property Buyers

Tuesday, July 4th, 2017

It’s getting very close to tax time and if you’re a property investor in Melbourne, or you’re thinking about building a property portfolio, you should also be thinking about smart ways to save money at tax time.

But what is the best property investment advice for taxpayers? When you own real estate, there are many costs associated with the purchase that you need to be aware of before you buy. By understanding the reality of land tax, capital gains tax and also stamp duty, you will have a clearer knowledge about the real costs of property investment – more than just your mortgage.

If you’re not sure, it’s vital that you get professional advice from an experienced accountant, or a financial advisor who specialises in property investment.

The good news is that there are multiple ways that you can avoid or reduce some of these additional property-related costs. For clever ways to minimise your property-related tax liability, try these practical tips to save money:


1. Purchase the house/property as your principal place of residence (PPOR)

Fact – if you purchase a property as an individual and live in the property, the property will be exempt from land tax.

Then, when it’s time to sell the property, it will also be exempt from capital gains tax. This can represent a saving of thousands of dollars.

As your PPOR, you can move out and rent your property for as long as 6 years before it is no longer considered your PPOR for tax purposes. Of course, there is specific and important criteria you must meet to be eligible.

It’s another great reason to talk to your accountant for the right advice and do some research before jumping in to any significant financial investment.


2. Property is a long-term investment

Make sure that you hold on to the property for at least 12 months before you sell. If you purchase a property and then own it for more than a year before you sell, you will receive a 50% reduction in your liability for capital gains tax. Find out if you are eligible by talking to your trusted advisor. Generally speaking, the longer you hold property, the better. Of course there are sometimes crashes in the market but if you are in a position to hold on throughout these infrequent times, things always get better – eventually.


3. Negatively gear your property

For purchases of investment properties in Melbourne – if you have bought with the assistance of a loan and the interest you pay on the mortgage is more than the incoming rent that property returns to you, you are officially making a loss.

It’s a loss that can be deducted from your income to help reduce your overall tax liability – and that means the loss that you make on the investment property can actively reduce the amount of personal income tax that you have to pay.

If your income is not enough to absorb the loss, it is rolled over to the next financial year. To find out more, in relation to your own personal financial and tax circumstances, talk to your accountant.


4. Depreciation makes a difference

Anyone who purchases a property for income-producing purposes is able to depreciate the cost of the building – plus some items within the building – against their taxable income.

These can include such items as a dishwasher, oven, blinds, carpets and more.

It’s known as a non-cash deduction and the great news is that it can have a significant impact on reducing your tax liability.

Generally speaking, if your property was built after 1985, the ability to claim the depreciation is there – but always talk to your accountant for the best advice about your individual circumstances.

Start by organising a qualified quantity surveyor to inspect your property and they will create a depreciation schedule to hand over to your accountant.


5. Claim the costs

Costs associated with your investment property can be claimable – including an income tax deduction for repairs and maintenance related to your rental property, plus the advertising fees, agent’s fees, advertising costs to find a new tenant, plus other things, including cleaning, gardening, rates, insurance and land tax.


If you have any questions about your finances, either personal or business, please do not hesitate to contact Loans Actually on (03) 8805-1850 or email glenn@loansactually.com.au


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