Despite tighter lending rules, property investors are still entering the Australian property market. Unfortunately, not everyone is knowledgeable on the tax deductions that they are supposed to enjoy on their property investments. H&R Block’s Mark Chapman offers some valuable tax tips to the first-time investor:
- Tax deductions. Investors can claim tax deductions on various investment-related costs, including interest on borrowed funds, borrowing costs incurred in arranging finance, bank charges for bank accounts managing investment income, management fees, home office costs, subscriptions to investment-related journals, obtaining tax advice, and travel costs associated with investments.
- Sales income. Capital gains tax is charged for the sale of investments including shares held for long-term gain. If investments are retained for more than 12 months, you have access to a 50% discount. Interest or dividends earned from those assets are taxed as ordinary income.
- Dividend reinvestment plans. Dividends are included in your assessable income for tax purposes even though you never saw any cash.
- Credit refunds. If you have less than $18,200 taxable income and you receive franked dividends, you can claim a refund of the franking credits paid on the dividends you received.
- Foreign income. Income from foreign investment assets is still taxable in Australia. However, you may be entitled to a credit against your Australian tax for any foreign tax paid.
- Losses. Annual income losses due to negative gearing can be offset against annual income.
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