How Can Property Investors Maximise Their Tax Savings?

One of the best ways to improve the ROI for your property investment is to minimise your costs, which will eat into your returns. And one of the biggest costs that Australians face and cannot avoid, is taxes.

“Depending on your income bracket, most property investors earn more than $100,000 per year, so they are paying anywhere between one-third to one-half of their income in taxes,” says Chad Egan, CEO of GPFG. “For example, Australians earning over $100,000 are taxed 32% and those above $180,000, are paying 45 cents on every dollar earned. This is a massive amount of tax every single year. We teamed up with some of the best tax professionals and accountants to help our clients maximise their deductions on their property investments, which helps improve their ROI and keep more money in their pocket.”

Tax benefits and deductions for Australian property investors

Below are our top 10 best and most common tax deductions our Australian clients are using to save money and improve ROI for their investments every year. These can also be applied to GPFG investments for overseas properties.

We encourage you to speak to one of our tax advisors about your specific property investments and your applicable deductions.

1. Interest on your mortgage payments. Mortgage interest is usually the largest deductible expense for property investors. You can claim the interest portion of your loan repayments as a tax deduction. However, if you use some of the loan funds for personal purposes, the deductible amount may be reduced proportionately.

2. Depreciation. Depreciation refers to the gradual decrease in value of certain assets over time. You can claim depreciation on the building structure (capital works deduction) and on eligible plant and equipment assets (depreciating assets). A quantity surveyor can provide a depreciation schedule to maximise your deductions.

– Capital Works Deduction applies to the structural elements of your property, such as walls, roofs, floors, and windows. The deduction can be claimed over a period of 25 or 40 years, depending on the age of the property.

– Depreciating Assets includes eligible items such as carpet, appliances, furniture, and air conditioning units. You can claim depreciation on these assets, typically over a shorter period.

“For our off-the-plan properties, the deductions on depreciation are quite substantial within the first few years of being brand new,” says Chad. “We provide all of our clients with a quantity surveyor report that includes a tax depreciation schedule, which they can submit with their tax returns.”

3. Quantity Surveyor Fees. In order to calculate the depreciation and claim it every year, you will need a quantity surveyor who will provide you with an accurate depreciation schedule. In addition to the tax depreciation, the fees incurred while consulting with a quantity surveyor are also deductible.

4. Management fees. You can claim deductions for expenses incurred while earning rental income, including property management fees, and any repairs and maintenance that keep the property operational. You will want to keep accurate records and receipts to claim these deductions.

5. Insurance premiums. Insurance policies such as property insurance, can not only protect your investment, but the premiums can also be deducted from your tax bill. There are different types of insurance that are required or optional, depending on the location of your properties, so talk to your tax advisor and accountant to make sure you have proper coverage for your assets, whether your property is in Australia or overseas.

6. Marketing costs. Any expenses associated with finding and keeping tenants in your property, such as advertising, photography, or agent listing fees can also be used as deductions. Just like your management fees, keep proper receipts and records to maximise your deductions.

7. Stamp Duty Savings. Stamp Duty is a state or territory tax imposed on transactions, such as the sale or purchase of a property. However, if you are buying a brand new or yet-to-be-built property, such as a house and land package or new apartment unit – you may qualify for a stamp duty exemption. When purchasing property overseas, while there are always costs for administration and contracts, there is a significant savings for investors when compared to the Stamp Duty and taxes in Australia.

“This is one of the biggest cost savings overseas investors are seeing,” says Chad. “The average home in Australia is now close to $1million. Even if you bought a unit for $750,000, you will be paying close to $30,000 on top for Stamp Duty. On the other hand, you can buy a beautiful villa or off-the-plan unit in Bali or Thailand for less than $300,000, and avoid the extra transactional fees.”

8. Borrowing Expenses. When you incur costs associated with obtaining a loan for investment property, such as loan establishment fees and mortgage insurance, you can claim deductions for these expenses over five years. Our team of accountants and mortgage brokers will supply you with all the necessary documentation and information you need to claim these deductions.

9. Repairs & Maintenance. Repairs to maintain the property can be claimed as an immediate deduction. This includes costs for a handyman, plumbing or electrical work that keep the property operational for tenants.

Understanding repairs vs improvements deductions.

While repairs to the property can be an immediate deduction, any improvements that enhance the value or extend the property’s value and useful life are usually claimed as capital works deductions over time. Understanding the difference between the two will help you claim deductions, either as immediate savings as well as over the course of owning the property.

10. Property investor seminars. One of the best ways to improve your returns is to be a smart, educated investor. Property investment seminars can help to not only provide basic education on best ways to market and maintain your property, but also give updated information on the property market, locations, and rental yields. All expenses associated with these seminars, including the course price and travel, can be included as deductions as well.

Talk to the GPFG team of qualified tax advisors.

For more information on how you can calculate your tax savings and deductions, talk to the team at GPFG. Remember to keep proper records of all your rental property expenses and seek advice from our qualified tax professionals or accountant to ensure you are complying with the relevant tax laws and maximising your deductions within them.

Have questions about our Premium Partners, finance, investment opportunities & solutions?