Buying property is a common form of long-term investment, but as an Australian property investor, there are a lot of things to take into account to ensure that processes run smoothly. For instance, purchasing and owning an investment property come with several taxes that you need to know and fully understand. Here are some basic things that you need to know about taxes on investment properties:
Land tax is an annual tax that a property investor needs to pay for the land or property that he/she owns
Capital Gains Tax (CGT)
Like income tax, CGT is tax incurred by a property investor on any income from the property but in this case, once it is sold. Check with your accountant or financial adviser on how this is calculated but in general, the CGT rate is the same as the rate of the income tax.
This is an annual tax that a property investor needs to pay for the land or property that he/she owns. This does not include the main place of residence, as well as existing dwellings on the property. Land tax is imposed by all state and territory governments. Also, policies on land tax vary per state so make sure to contact your local government for details.
These are the taxes commonly incurred by Australian property investors. You can use this as your guide but it is still important to seek professional investment property advice so you will better understand all taxes to be paid.
Local Authority Rates and Charges
This is probably on top of the list of any property investor in Australia. Local Authority expenses refers to council rates collected that is used to fund investments and expenses of the local government. These include community services, maintenance of parks and other public facilities, and garbage collection. The amount depends on the assessed market value of your property and policies of your respective local council.
This refers to tax an investment property incurs on income he/she earns from the property, whether through rent or any other form of profit. However, there are ways to offset income tax through deductions and interest repayments on your loan.
Bear in mind that there are other costs involved in investment properties. These include conveyancing fees, stamp duty, and legal costs. With so many expenses and deductions to deal with, it is essential to be prepared and keep track of dates to make payments and avoid penalties.
Do you have other tips when it comes to property tax in Australia? Share your investment property advice in the comments section.