Tax Savings Guide

Negative gearing occurs when the costs of holding an investment property — including interest, management fees, maintenance, and rates — exceed the rental income. The resulting loss can typically be offset against your other taxable income, reducing your overall tax liability.

• The loss reduces your total taxable income for the year
• Interest on the investment loan is generally the largest deductible expense
• Negative gearing is a cash-flow strategy, not a guarantee of profit — it relies on capital growth
• Positive gearing (rent exceeds costs) generates taxable profit but better cash flow

Depreciation is a non-cash deduction that can significantly boost your after-tax return. There are two categories: capital works (the building structure) and plant & equipment (removable assets like carpets, blinds, and appliances).

• Order a tax depreciation schedule from a qualified quantity surveyor
• Capital works (Division 43): 2.5% or 4% per year depending on construction date
• Plant & equipment (Division 40): deducted at varying rates based on effective life
• Second-hand plant & equipment purchased after 9 May 2017 may have limited deductibility — seek advice

When you sell an investment property, the capital gain is subject to CGT. However, if you have held the property for more than 12 months, you may be eligible for the 50% CGT discount, which halves the taxable gain.

• Assets held longer than 12 months qualify for the 50% CGT discount for individuals
• The discount is applied before the gain is added to your assessable income
• CGT does not apply to your main residence (subject to the 6-year absence rule)
• Selling in a year with lower income can reduce the effective CGT rate

Many property investors miss legitimate deductions. Keep thorough records and claims for all expenses directly related to generating rental income.

• Loan interest and ongoing loan fees
• Council rates, water and sewerage charges
• Property management fees and letting fees
• Insurance (landlord, building, contents)
• Repairs and maintenance (note: improvements are capital, not immediately deductible)
• Travel to inspect the property (subject to restrictions introduced in 2017)

The entity that legally owns the property determines who pays tax on the income and capital gains. The right structure depends on your income, long-term goals, and risk profile — and should be decided before purchase.

• Individual ownership — simplest, eligible for the 50% CGT discount
• Joint ownership — income and gains split according to legal ownership
• Trust ownership — flexibility in income distribution, but no individual CGT discount
• Company ownership — flat company tax rate, no CGT discount, franking considerations
• SMSF — concessional tax rates in accumulation (15%) and pension (0%) phases

Tax law is complex and constantly changing. A qualified, registered tax agent who understands property investment can help you structure correctly, claim every legitimate deduction, and avoid costly mistakes.

• Engage an accountant before purchasing, not just at tax time
• Review your structure annually as circumstances and legislation change
• Keep all receipts and a property logbook for inspection trips
• Ensure your depreciation schedule is ordered before the first tax return