Six Tax Benefits Every Investment Property Owner Should Know with ATDS
Owning an investment property comes with numerous tax advantages, even if the property isn’t immediately profitable. Australian Tax Depreciation Services (ATDS) is here to guide you through six key tax benefits that every property investor and manager should understand.
1. Negative Gearing
Negative gearing occurs when the expenses of owning an investment property—such as mortgage payments and maintenance—exceed the rental income, resulting in a loss.
While this may seem unfavorable, it’s a significant tax benefit. You can use the loss to offset your taxable income, reducing the amount of tax you owe. For property owners with negatively geared properties, ATDS ensures you’re maximizing these deductions while staying compliant with ATO regulations.
2. Capital Gains Tax (CGT) Exemptions
When selling an investment property, any profit is subject to Capital Gains Tax. However, there are ways to minimize this tax:
- If you’ve owned the property for more than 12 months, you qualify for a 50% CGT discount.
- Your main residence is generally exempt from CGT under the ‘main residence exemption.’
In cases where part of your home is rented out or used for business purposes, partial exemptions may apply. ATDS helps you navigate these rules to maximize savings.
3. Claiming Interest on Your Mortgage
If your investment property generates income, the interest on your mortgage is tax-deductible. This deduction is one of the most effective ways to reduce your taxable income as a property owner.
Keep in mind, owner-occupied properties are not eligible for this benefit—it applies strictly to investment properties. ATDS ensures you claim every eligible deduction.
4. Tax-Free Equity Loan Withdrawals
As your property appreciates in value, you can access its equity without selling it. Equity loan withdrawals are tax-free since they don’t count as income.
If you use the funds for further investments, the interest on the loan may also be tax-deductible. Always consult a financial advisor before making decisions, and trust ATDS to help you track and claim deductions effectively.
5. Small Expense Deductions
Many smaller expenses associated with owning an investment property can add up to significant savings. These include:
- Land tax
- Strata fees
- Council rates
- Insurance
- Legal and bookkeeping costs
Additionally, repairs and maintenance related to wear and tear are deductible in the year they occur. However, renovations or upgrades that enhance the property’s value are treated as capital works and depreciated over time. ATDS ensures your deductions are categorized and claimed correctly.
6. Depreciation
Depreciation is one of the most powerful tax benefits available to property investors. As your property ages, both its structure and assets lose value. The ATO allows you to claim this loss as a deduction.
There are two main types of depreciation:
- Capital Works (Division 43): For structural elements like walls, roofs, and fixed items such as fences or kitchen cabinetry.
- Plant and Equipment (Division 40): For removable or mechanical items like air conditioning, carpets, and security systems.
A tax depreciation schedule, prepared by ATDS’s qualified quantity surveyors, identifies all claimable deductions for your property. Our reports are tailored to both residential and commercial properties, helping you reduce your taxable income significantly.
Maximize Your Tax Savings with ATDS
ATDS specializes in uncovering every available deduction for your investment property. Our comprehensive, ATO-compliant depreciation schedules ensure you’re fully equipped to minimize your tax obligations.
The ATDS Guarantee: If we can’t secure at least double our fee in deductions for the first financial year, you won’t pay a cent for our services.
Contact ATDS today to learn more about maximizing your investment property’s tax benefits or request a personalized quote.