Tax tips for property buyers in Melbourne – If you’re thinking about investing in property or already have a property investment portfolio, sure enough you’ll be thinking about how to save money at tax time. But what is the best property investment advice for taxpayers? There are many costs associated with owning real estate in addition to the purchase price that you need to be aware of before you buy, such as land tax, capital gains tax and stamp duty. With this said there are several ways in which you can avoid or reduce some of these additional costs. So you might be thinking, if I buy a property in Melbourne, how can I minimise my tax liability? Here are some of the best tax tips for property investors that will help them save money.
- Buy the house/property as your principal place of residence (PPOR) – if you buy a property as an individual and live in the property this property will be exempt from land tax. When it comes time to sell the property it will also be exempt from capital gains tax. This could save you thousands of dollars. As your PPOR you are generally allowed to move out and rent the property for up to 6 years before it is no longer considered your PPOR for tax purposes.
There are of course many circumstances you must meet to be eligible. You can find out more here.
- Hold on to the property for at least 12 months before you sell it – if you buy a property and own it for longer than a year before you sell it you will receive a 50% reduction in you capital gains tax liability. To work out whether you would be eligible or what requirements you need to meet, click here.
- Negative gear the property – if you have purchased an investment property in Melbourne with a loan and the interest you are paying on the loan is more than income you receive from rent, then you are making a loss. This loss can be deducted from your income to reduce your overall tax liability, meaning the loss you make on your property can reduce the amount of personal income tax you pay. Where the other income is not enough to absorb the loss it rolls over to the next tax year. You can find out more here.
- Depreciation – anyone who purchases a property for income-producing purposes is entitled to depreciate the cost of the building itself as well as the items within the building, against their taxable income. Items within the building can include the dishwasher, oven, carpet, blinds etc. This is known as a non-cash deduction and can reduce your tax liability. Generally if your property was built after 1985 you should be able to claim depreciation. You would need to organise a qualified quantity surveyor to inspect your property and prepare a depreciation schedule for your accountant.
- Claim the costs associated with your investment property – you can claim an income tax deduction for your costs in repairing and maintaining your rental property as well as property agent fees, advertising costs to find a new tenant, rates, land tax, cleaning, gardening, insurance and travel to inspect the property.
At Luxton Property Group we specialise in purchasing property for investors, and we give the best property investment advice and tax tips for property buyers in Melbourne. You might just be starting out in the property market or be a seasoned property investor looking for an edge. The above is just a small glimpse in to how we save our client’s money. We have been buying property for over a decade and have a superior buying service at a more affordable price. Request a call today to speak to one of our property buying experts for a no obligation discussion on how we can assist you with your next purchase.