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Tax-smart tips for your investment property

Being tax-smart when investing in property means more than making the right property choices.  If you use your property to earn income at any time, you need to:

  • Keep records from the start
  • Work out what expenses you can claim as deductions
  • Work out if you need to pay tax instalments throughout the year
  • Declare all rental-related income in your tax return
  • Consider the capital gains tax implications if you sell.

Getting record keeping right makes tax time easy.

Records must be kept for the period you own the property (and after disposal) so that you don’t pay more tax than you need to if you sell your property at a later stage.

The following records are required to work out if you are subject to capital gains tax if you sell a property that you use to earn income.

  • Contract of purchase
  • Conveyancing documents
  • Loan documents
  • Costs to buy the property
  • Borrowing expenses
  • Proof of earned rental income
  • All your expenses
  • Periods of private use by you or your friends
  • Periods the property is used as your main residence
  • Loan documents if you refinance the property
  • Efforts to rent the property out
  • Capital improvements
  • Contract of sale
  • Conveyancing documents
  • Sale of property fees
  • Calculation of capital gain or loss

When preparing a tax return remember the following:

  • Include all the income when you receive it
  • Get your expenses right
  • Keep records to prove it all

When selling an investment property or your main residence that you rented out, remember:

  • You may have capital gains tax, even if the property is transferred to someone else
  • A capital gain is the difference between your cost base and your capital proceeds
  • If your costs of ownership is greater than your capital proceeds then you incur a capital loss
  • If you claim a deduction of capital works or depreciation in any income year, you cannot use these in your cost base
  • If you own the property for more than 12 months, and you are an Australian resident, you may be entitled to a 50% discount of the capital gains tax.

Download a copy of the factsheet on Tax-smart tips for your investment property.

For more information go to the ATO website.


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