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Tax-smart Tips for your Investment Property Journey

When investing in property, it is not only essential to choose the right property; you will also need to be aware that you will have certain tax implications and entitlements. Below are a few tips to help ensure that you handle everything correctly.

Keep Accurate Records

Keeping accurate records of all property-related expenses throughout each stage of the process is essential.

Buying Process

Documents needed during the buying process:

  • A contract of purchase
  • All associated conveyance documents
  • Loan documentation
  • Costs associated with purchasing the property
  • All related borrowing expenses
  • Your Title Deed

You will need to establish an accurate record-keeping system before doing anything else. This can be as simple as setting up a spreadsheet or you can use other accounting software that you are familiar with or we can assist you with options. After doing this, you will have to keep records relating to all transactions during the time of owning the property.

Records associated with the cost of buying the property must also be kept. These include legal fees, initial repairs and stamp duty on the transfer. Although you cannot claim an immediate tax deduction for these, they will help reduce the amount of tax you pay if you sell the property at a later stage.

During Ownership

Documents needed during ownership:

  • Proof of earned rental income
  • All related expenses
  • Periods of private use by you, friends or family members
  • Times where the property has been used as your main residence
  • Loan documents if your property is refinanced
  • Efforts to get the property rented out

All rental income must be included in your tax return. Immediate tax deductions can be claimed for items such as rates and taxes (including council, rates, water and land taxes), property management fees (if applicable), body corporate fees, gardening, cleaning costs and repairs and maintenance that took place while tenants occupied your property. Tax deductions can be claimed over several years for borrowing costs and capital works (also referred to as building costs).

When submitting your tax return, be sure to only claim expenses for times your property was rented out or genuinely available to rent. You cannot claim for times where you, a friend or family member used the property free of charge. It is recommended that you scan copies of all receipts and invoices so that you can claim everything you are legally entitled to claim for.

During the Selling Process

Documentation needed during the selling process:

  • Contract of Sale
  • Conveyance documents
  • Proof of capital improvements made
  • Sale of property fees
  • Calculation of capital gains and/or losses

When selling an investment property or your main residence that has been rented out, you may be liable to pay capital gains tax, even if the property has been transferred into someone else’s name.

Capital Gains Tax is classified as the difference between your costs of ownership and the amount received when selling the property, or the market value when transferring it into someone else’s name. If a capital works deduction has been claimed for in any income year, your cost base must not include these amounts. However, if you have owned the property in question for longer than 12 months, you are entitled to receive a 50% discount on the capital gains tax.


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