Investing

You have to do your own research on what, where and how to buy. We can provide loans designed for people who love investing in property.

Investing in housing market in Australia is pretty simple way to create wealth. You don’t need to understand other financial instruments that are quite complex. Understanding the basics of taxation system in Australia is important to make the right decision. Its major benefit is the tax savings that is reached by depreciation. Depreciation is a non cash expense which means you don’t pay anything out of your pocket but in the taxation world, depreciation reduces the book value of the house. This reduction is claimed as a tax deductible expense at the end of financial year. This can save you a lot of money that you would be paying on tax every year. Depreciation accounts for 2,5% of the property book value each year.

Example:

If you are a full time worker making $100k on salary, having investment property of $700k, you can deduct depreciation of $17500 out of out of your tax that would be otherwise paid to the government.

Investing in Property

Comparing these two figures of tax liability is easy to understand how investment properties can bring tax savings.

Depreciation can be calculated according to straight line method which is the value of the house but not land divided by its useful life 27.5 years. House value $700k/27.5 = $25 450 each year for 27.5 years.

There are other expenses associated with investing in properties that are tax deductible such as interest on loan, any fees paid to the real estate agent, repairs and many more…

Lets say that after owning the property for 5 years the market price is $800k. What is your actual profit?

Investing in Australian Property

Taxable gain will be added to your assesable income at the end of financial year and will be taxed according to the marginal tax rate bracket. Taxable gain has been reduced by 50% as an investment property held for more then 12 months is discounted on capital gain by 50%

Please speak to your tax agent for professional advice