There are many tax implications of owning a property in Australia. A tax advisor will help you harness the system for your benefit.
Speaking to a tax advisor will help you understand the strategies that will work for you. A little bit of planning will help you save thousands of dollars each year.
There is a lot to consider when investing your money. Investing itself isn’t necessarily complicated, but the implications of investments can be.
Buying a property is no exception to this rule. There are a range of tax issues to consider before making a purchase as property tax. Getting professional advice can help you save thousands of dollars in the long run. Here’s why you should see a tax advisor before buying:
Who will purchase the property?
When buying a property, you have the option of buying it as an individual, in joint, through the name of a company/trust, or in your superannuation fund. Each avenue has advantages.
Income after deductions will be taxed at your personal rate, or business rate if applicable. This is why it may be more cost effective to buy the property in the name of a company, or in the name of only one partner.
Capital gains tax
For properties that are not your primary home, you must pay capital gains tax when you sell in the future. Capital gains tax is calculated on the difference between the cost base and the sale amount. You should definitely consider the capital gains implications if you do not intend to live in the house permanently from day one.
A tax advisor will be able to help work out what will be the most cost effective way of owning a property in the long run.
Depreciation is the amount the property and capital expenses ‘devalues’ over time. A tax advisor will be able to help you calculate the benefit of buying new over existing. They will also help you with regards to depreciation of capital expenses.
Expenses are short-term costs associated with maintaining or managing a property, such as the real estate management fees in Australia. These you can claim as deductions each year.
Capital works are not an expense, and not deductible on a yearly basis. It’s like a new carport or wardrobes which depreciate over time.
The cost base is made of the purchase price and other buy/sell costs, such as conveyancing fees. All cost included in the cost base reduce the amount of capital gains tax you will be required to pay when you sell the property in the future.
Again, a tax advisor will be able to explain these concepts in more depth and highlight the potential strategies for long-term savings.
Tax is a complicated thing and many interplaying factors to consider. Speaking to a tax advisor will help you understand the strategies that will work for you. A little bit of planning will help you save thousands of dollars each year.