Owning an investment property can be a great way to build long-term wealth, but only if you manage the tax side effectively.
Whether you’re starting out or expanding a portfolio, understanding how to manage your tax is essential.
Here are seven things every property investor needs to know.
1. Keep Meticulous Records from Day One
Good record-keeping is the foundation of good tax planning. From the moment you purchase a property, make sure to document everything, including contracts, legal fees, loan statements, agent fees, repair invoices, depreciation schedules, and evidence of tenant communications. Having these records means you won’t miss out on deductions and makes capital gains tax (CGT) calculations far easier when you eventually sell.
2. Claim All Eligible Deductions
Many property investors miss out on deductions simply because they don’t understand what’s claimable. Advertising for tenants, property management fees, council rates, loan interest, insurance, repairs, maintenance, and even depreciation on fixtures can all be deductible. Just ensure your property is genuinely available for rent, and adjust for any private use or vacancy periods.
3. Report Every Dollar of Rental Income
The ATO is watching, and that includes rent from Airbnb, Stayz, subletting, or even retained bond money. You must declare all income received during the financial year, even if it comes through an agent or platform. Failing to report can lead to audits and penalties.
4. Understand PAYG Instalments and Tax Planning
If your rental property generates significant income, you may need to make Pay As You Go (PAYG) instalments. Planning ahead can prevent surprise tax bills and smooth out your cash flow. Speak with your accountant to determine whether you need to prepay expenses, defer income, or make voluntary contributions.
5. Know Your CGT Obligations
When the time comes to sell, capital gains tax can eat into your profits. The taxable gain is calculated as the difference between your property’s sale price and its cost base (including purchase price, legal fees, stamp duty, and improvements). If you’ve owned the property for more than 12 months, you may be eligible for a 50% CGT discount as an Australian resident. Just be aware that private use, discounts, or transfers below market value can impact your calculation.
6. Maximise Depreciation with a Professional Schedule
Property investors can claim depreciation on both the building structure and eligible fixtures. Engaging a quantity surveyor to prepare a tax depreciation schedule can help maximise this deduction, particularly for newer properties or those with significant renovations. These deductions can amount to thousands each year.
7. Get Expert Advice
Tax legislation changes often, and no two properties (or investors) are alike. A tax-smart investor knows when to call in the professionals. A registered tax agent or accountant with experience in property can help structure your ownership, forecast liabilities, and identify deductions you may have overlooked.
Disclaimer: This is general information only and is subject to change at any given time. The content of this article is general in nature and is presented for informative purposes. Your complete financial situation will need to be assessed before acceptance of any proposal or product. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
