The Tax Benefits of Property Investment

A common question many people ask revolves around how to reduce tax. The obvious answer to this dilemma is to increase expenses and one way to do this is to consider buying an investment property. Claiming through investment property is a popular way of introducing tax benefits to anyone wishing to reduce their taxation burden. Investment property expenses can make up a large proportion of available tax deductions from the Australian Tax Office.

Under the current Tax rules, investors may claim some of the costs for having an investment property. Investment property claims can vary from property to property and may be different if the property is established or newly constructed.

Investment Property Expenses can include:

  • advertising for tenants
  • bank charges
  • body corporate fees and charges
  • borrowing expenses
  • capital works
  • cleaning
  • council rates
  • decline in value of depreciating assets
  • gardening and lawn mowing
  • insurance – building, contents and public liability
  • interest expenses
  • land tax
  • legal expenses (excluding acquisition costs and borrowing costs)
  • pest control
  • phone
  • property agent fees and commissions
  • repairs and maintenance
  • stationery and postage
  • water charges

The list is quite extensive and you can see that by negative gearing properties these items could translate into a considerable amount of deductions. It’s the amount of expenses, “running costs” we’ll call them, which make the property run at a loss. Of course, out of all the expenses, bank interest is the largest so in theory, if you could borrow less your cost would reduce.

Simply put, negative geared properties do not generate enough income, through the rent, to cover all the running costs of investment. Therefore the investor is required to use some of their own funds to make up this shortfall. Negative Gearing is the result of this loss but clearly what you are aiming to do is generate growth over time to outweigh the loss in cash flow

Positive gearing means that the income generated by the property covers all of the costs of running the investment. Consider positive gearing properties to produce income which can then assist other negative geared properties in your portfolio.

It’s important to understand that owning an investment property is not simply about minimising the taxation position, we highly recommend to look for Investment Property Advisory Firm. The tax benefits are a by-product of owning the property. In reality you have to pay out the money that you are claiming on tax first, which is an oft missed point.

The main reason for owning property is to create wealth.


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Investors Direct Financial Group

Investors Direct Financial Group (IDFG) was established in 2001.
Our mission is to help our clients achieve and maintain their financial freedom.

Members of the IDFG Group include:
  • Nanmon Financial Services Pty Ltd, trading as Investors Direct Financial Group (ABN: 52 097 697 820 ; ACL: 402950)
  • ID Property Advisory Pty Ltd (ABN: 69 141 716 412 ; Real Estate Licence: 071792L)
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  • 8 Star Homes Pty Ltd (ABN: 83 135 066 876)