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What You Need to Know About Tax & Your Investment Property

When it comes to property investments and tax there are 3 main things to be aware of:

* Negative gearing.
* Tax deductions.
* capital gains tax.

Negative Gearing

Negative gearing is when the annual cost of your investment is more than your return. Basically, when the cost of maintaining your property and paying the interest on your loan is more than the rental income you get from it, you are negatively geared.

When this happens the government allows you to deduct the costs of your property from your gross income. So say your income is $60,000 a year but your property costs you $15,000 a year, you’ll only need to pay income tax on $45,000.

This way you’ll pay less tax, but don’t be mistaken, it is still a loss -just a smaller one – that hopefully will be more than made up for by the property’s increasing value. You probably won’t see a return on your investment until you sell the property, and only if it’s for a much better price than you originally bought it for.

Tax Deductions

Whether you are negatively geared, or getting a positive income stream from your property, you can claim expenses relating to your rental property for the period your property was available for rent.

All the following expenses can be claimed:

* Advertising for tenants, agents fees and commission.
* Interest payments and loan fees.
* Council rates, land tax and strata fees.
* Depreciation of items such as stoves, fridges and furniture.
* Repairs, maintenance, pest control and gardening.
* Building and landlords insurance.
* Stationery, phone costs and any travel to inspect the property.

The above is not a full list of what you can claim. Get proper advice from a tax expert before putting in your return.

Capital Gains Tax

What the Government gives with one hand, it takes with the other. Capital gains tax is a tax on the profit you’ve made on the property. So it’s based on the difference between what you sell it for and what it cost you (the purchase price plus anything you have spent on capital improvements or renovations).

Definitely get advice on what you might be up for when considering selling your investment property.

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0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Home Loans Joondalup

Christmas Present Or January Sales? When Is The Best Time To Buy Property?

There are just under eight weeks to go until Christmas – even less time until the frivolity of the holiday season is upon us. It’s a lively time of hectic personal, social and business commitments, followed by a period of relative down-time. So what if you’re in the market for a new home – should you buy before Christmas or put it off until next year?

Whether it’s gift-giving, taking a holiday or entertainment expenses, the festive period can put a strain on the budget. According to Credit and Charge Card Statistics reported monthly by the Reserve Bank, Australians owe more than $44.9 billion in credit card debt, and our credit card purchases in December are at least 15 per cent higher than the average monthly purchases throughout the rest of the year. With many economists predicting more than one interest rate rise in the next few months, house-hunters need to plan their finances very carefully.

But while it’s an expensive time of year, there’s also opportunity to snap up a pre-Christmas property bargain.

“It is a really good time for purchasers to be picking up a good buy, pre-Christmas,” says Georgi Coward, Real Estate Agent with Cunninghams Property. Coward explains that in December, homes on the market are those leftover from spring, which may not have been priced appropriately. “Vendors realise at this stage that it hasn’t sold and that they’ll now be waiting an extra, longer time.”

“A lot of buyers disappear as well, so there are just the really keen ones that are out there,” says Coward. “They’re often the ones that will pick up a bargain, as vendors are more negotiable, and there’s a little bit more desperation to sell, move on and enjoy Christmas.”

As for property values, there are indications that prices will only go up from here. “Overall we’re finding that buyers are very confident about the direction of the market and most agree that 2010 will see between five to ten per cent price growth across the board,” says John McGrath, CEO of McGrath Estate Agents. “Serious buyers have been looking to get set in the market for the last three months.”

McGrath says that interest rate rises will have an impact on anticipated price growth “only if we see a two per cent hike in the next nine months, which is unlikely.” He says, “Most buyers have factored in another one per cent in their thinking and are happy to buy with that in mind.”

But buying next year has its benefits too. “January can be a good time to be buying with leftover stock that hasn’t sold prior to Christmas,” says Coward. Holding off also gives you a little more financial breathing space over the holiday season, and the chance to pounce on the fresh New Year stock as it comes onto the market – while other buyers are taking holidays.

“There’s an opportunity that you can jump on it before anybody else, and before it hits the papers,” says Coward. “But you may end up paying a premium to take it off the market.”

If your home is, or will be on the market before you buy, these considerations apply to you as a vendor as well, not to mention the need to time both your transactions optimally. So, whether ‘tis the season for a sale or not, ultimately depends on your circumstances and needs. And your Christmas wish list.

If you enjoyed this post or found it useful, please consider posting a comment or 'Sharing' it using the button on the top left of the page.
0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Home Loans Joondalup