Minimising tax on rental property investment

Property Investor

As a property investor, you don’t want to be paying unnecessary taxes that chip away at your bottom line.

You only want to be paying the taxes you have to and you want the process to be as organised and smooth as possible.

Property Observer has given some great tips on how to minimise the tax you pay on your property investment.

Keep paperwork in order

It’s important to keep a record of al expenses in the initial purchase of your investment, those initial expenses are a part of the property’s cost base and help to reduce capital gains tax when you sell up. Be organised and file away all investment-related receipts.

Pre-paying interest

Consider the option of prepaying your interest and other expenses.

Replacing appliances and fixtures

If major appliances or fixtures need to be replaced on your property, keep in mind those repairs can be claimed in the same tax year and replacements need to be depreciated as they get older.

Depreciation schedules

It may be worth considering getting a depreciation schedule. You have to pay for a schedule but they mean you can claim deductions for capital works and assets on the property.

Tax and titles

Your tax on the property should be handled the same as the names on the property title. So that means if the property is in two joint names the income and expense claims should be declared half each in both tax returns.

Beware of redrawing

Redraw facilities on loans are handy but they should be used with caution for personal use. If you redraw on your loan it changes the amount of interest you can claim as a tax deduction. It could also mean the difference between your property being positively or negatively geared.

Timing the sale

When selling, it’s best to try and time the settling of your property in a tax year that you have lower taxable income. Waiting a few extra years until you retire to sell up might make a big difference come tax time for example.

Loss-making investments

If you are selling a loss-making investment, it’s a good idea to try an sell in the same year as a profit-making investment property so you can offset that loss against your net capital gain.

Self-managed super funds

Get thorough financial advice before you buy an investment property through a self-managed super fund. You can win tax benefits through a SMSF but it’s not as tax-friendly to negative gear through one. They also involve restrictions not set on normal investors so contact Perry Finance today to get advice on property investment through a super fund.

Get advice

Don’t try and go it alone, get financial tax advice from a trusted professional who will know the best moves for you and your property investment to minimise tax payable.


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