The Tax Benefits of Property Investment in Australia

Following the ups and downs of 2020, Australia’s property market is finally experiencing some positive development, with properties steadily increasing in value across Tasmania and New South Wales in particular.

According to the ABS, the residential property price index for both Sydney and Hobart rose by 6.1% in this quarter alone. This has been unprecedented growth for Hobart, whose housing market is generally stable in comparison to the rest of the nation.

Hobart is no outlier here, however, as for the first time in years, all eight capital cities across Australia have been experiencing record rates of growth across their property markets, with a weighted average rise of 5.4% over this quarter, and 7.5% over the year thus far.

What does this mean for Aussies looking to invest? The short answer is a subsequent increase in the tax benefits available to you as a property investor. We’ll be exploring these benefits in detail below.

Deducting rental expenses

As property investment fuels Australia’s rental market, investors can actually claim back a fair amount of the costs associated with maintaining and managing their rental properties. These can include your rental management fees, advertising for tenants, council rates, building and yard maintenance costs, building and contents insurance, and also your income protection insurance as well.

Of course, just because all of this is claimable, doesn’t mean you shouldn’t do your research to find the services that are best suited to you and your investment. For instance, our team at My Rental have experience managing properties in some of Victoria’s most high profile suburbs. If you’re looking specifically for property managers in Fitzroy, for instance, our team has engaged with all the challenges and advantages of this iconic inner-city suburb, including environmental concerns and common repairs. 

Regional knowledge in property management is key for a host of reasons, including assurance that your rental property is always correctly valued, and that your rental income is in accordance with income generated from other neighbouring properties to name a few.

Claiming back interest and other loan costs

Adding another property to your investment portfolio undoubtedly means adding to your overall debt as you juggle multiple home loans. Thankfully, you can actually deduct any interest accrued on your investment property from your next tax return, as well as a list of other costs associated with your loan.

These additional costs include your loan establishment and account management fees, your mortgage registration, insurance, and broker fees, and the stamp duty on your loan as well. 

Property investors may also be able to claim back the costs of consulting their accountants as well, so be sure to maintain all records and receipts associated with your investment and loan application process to ensure that they can potentially all be included in your next tax return.

Depreciation of the building and fittings

The higher the value of your investment property, the more you’ll be able to claim back in depreciation, and we’re not just talking about the depreciation of the building here either. If you’ve invested in a property that’s been built recently, you can also factor in the depreciation of that property’s fittings into your next tax return as well. 

You should consult a qualified building surveyor to obtain accurate figures on the values and depreciation rate of your fittings and fixtures. As depreciation rates can range anywhere between 2.5 to 4% of the overall price paid for the building and its assets, calculating the depreciation of your fittings can yield a few hundred dollars worth of tax deductions over several years. 

Be sure to add the depreciation of your property’s fittings to your depreciation schedule to ensure that you take full advantage of these benefits as well as the others outlined above. By doing so, you’ll be making the absolute most of your investment property.

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Want even more insight into the intricacies of property investment in Melbourne? Visit the My Rental blog section today. 

If you’re interested in any of our property maintenance or management services, visit our website to find out more. You can find our property managers in Hawthorn, Richmond, Brunswick, Fitzroy, and other suburbs in and around Melbourne.