Investment property tax considerations

There are three main tax considerations to be aware of when buying, owning and selling an investment property.

Tax deductions

You may be able to claim expenses related to your property for the period your property is rented, or available for rent. The following are typical expenses that can be claimed. You should get taxation advice before submitting any claim as part of your tax return.

  • Advertising for tenants
  • Agents’ fees and commissions
  • Interest payments and loan fees
  • Council rates, land tax and strata fees
  • Depreciation of items such as stoves, fridges and furniture, hot water system
  • Repairs, maintenance, pest control and gardening
  • Building and landlords insurance
  • Stationery, phone costs and any travel to inspect the property.

Negative gearing

This is when the annual costs of your investment are more than the rental return. When this happens, the government may allow you to deduct the costs of your property from your gross income.  These costs could include your home loan interest, maintenance or repair costs and capital depreciation.  Negative gearing produces a "book loss" which you can offset against your other income, reducing the tax you pay.

Say your rental income is $10,000 but your costs are $20,000. This means you make a loss for the period of $10,000. This loss can be offset against other income the owner of the property earns. Hopefully that loss will be made up by an appreciation in the value of the property over time, but that is not guaranteed. This can be beneficial if you are on a higher marginal tax rate.

But there are risks. You need to be able to manage if your property loses value or if interest rates rise.

Capital Gains Tax

This is a tax you pay on any profit you make on the sale of the property. This tax is based on the difference between the cost of purchasing the property and the sum you receive when selling it. If you hold the property for more than 12 months and are an Australian resident for tax purposes, you can reduce your capital gain by 50%.

Apply Now

Articles on Financial Wellbeing

Need support?

Contact us

Get in touch with one of our Australia-based team.

Locate us

Our friendly branch staff are looking forward to helping you achieve your financial goals.

Important Information

Important Information

This article has been prepared by IMB Bank and contains general information only. It is not intended to be relied on as advice. It does not take into account your objectives, financial situation or needs. You should seek your own legal, financial, taxation or other professional advice before you make any decisions about your business. Consider the relevant Terms and Conditions or Product Disclosure Statement and Target Market Determination available here before deciding whether to acquire any products or services offered by IMB Bank. Lending criteria, terms and conditions, fees and charges apply to IMB loan products.