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Most Property Investors Are Missing Out On These Tax Savings

Updated: Jan 14, 2021

Property investing can be tough enough without the added complication of tax. In this post, we explain how investing can save you tax with a real-life example.


The average investor earning $85,000 who purchases a $600,000 property could save up to $20,000 in tax over 3 years from investing in a new property.



What expenses can you claim?

  • Management costs such as property agent fees and commission

  • Depreciation

  • Land tax

  • Body corporate fees and charges

  • Maintenance costs e.g. cleaning, gardening, pest control, repairs and maintenance

  • Interest expenses

  • Insurance (building, contents and public liability)

  • Some legal expenses


Example:


Joe builds a house for $600,000 that he wants to use as an investment property. He has a combination of cash and non-cash deductions that he can claim against his expenses.


The cash deductions consist of:

  1. the interest expense paid on his mortgage ($20,626); and

  2. rental expenses relating to property management, council rates and building insurance.

The non-cash deductions include:

  1. depreciation of buildings ($9,375) that consists of the cost of building the property spread over a property life of 40 years; and

  2. depreciation of fittings relating to the cost of internal furniture or equipment; and

  3. loan costs ($514) that include the cost of preparing the mortgage by the bank.



In total, these deductions sum to over $40,000 for the 3 years following the construction of the investment property. The tax credit of over $7,000 shows the amount of income tax saved each year assuming an income of $85,000.


If you have any questions, contact us at shayne@propertyinvestmentcoaching.com.au or call 1300 944 039 .

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