I was discussing property investment with a customer this week.  He and his wife are looking to enter the market for the first time.  We discussed everything from investment goals, interest rates, purchase price negotiations and risk appetite, through to impact on tax returns.  It was the latter that I thought was worth sharing some information on today.

Owning a property (or several properties) is a bit like having a small company.  They have their own profit and loss, balance sheet and cash flow.  Property investors can benefit in a range of tax breaks for all manner of deductions.  They are also subject to taxes most non-investor home-owners aren’t, including capital gains tax and land tax.

The ATO has some great resources available.  NAT1729 might not be the first thing you think of in the morning but it is a vital tool for existing or would-be property investors.  NAT1729 is the industry bible on what can and cannot be deducted, depreciated and expensed for tax purposes.  It has many helpful examples and is well-worth reading.  The ATO updates it every year.

A rental property is said to be ‘negatively geared’ where the deductible expenses exceed the income earned from the property.  For tax purposes, many investors like a tax loss.  At the same time, they don’t want to be putting cash flow in to support it.  Through good planning it I possible to achieve both.

Above all, do your research and understand what might lie ahead.  Buying and selling property smartly or achieving a good rental returns are part of property investment.  Understanding how it impacts your tax is another.

Murray Home Loans cannot advise you on tax matters.  You should always contact your accountant and/or financial planner to get specific advice.

Resources:

ATO Rental Properties Guide
https://www.ato.gov.au/Individuals/Tax-return/2017/In-detail/Publications/Rental-properties-2017/?page=1#How_to_get_this_publication

Depreciation specialists
http://deppro.com.au/
https://www.bmtqs.com.au/

Changes in the 2017 Australian Budget
https://www.hrblock.com.au/tax-news/budget-2017
http://www.afr.com/business/budget-2107-landlords-lose-travel-claims-in-negative-gearing-crackdown-20170509-1nxujk
https://www.bmtqs.com.au/news-media/media-releases/property-investors-lose-out-budget-changes