What are the benefits of an investment property?

People are consistently turning to real estate investment for its capital growth, tax benefits and future retirement income. 

Planning your structure 

As accountants and advisors, we can help in determining the optimum structure for the purchase of your investment property by assessing your current and future income. 

Selecting the correct structure is vital and the options include:

• As an individual
• As a partnership - jointly or tenants in common
• In a company
• In a trust (unit trust, discretionary trust)
• In a Self Managed Superannuation Fund

Before settling on a type of structure, consideration should be given to the following:

• Asset protection
• Income tax planning
• Refinancing
• Costs
• Retirement planning
• Succession planning
• Other taxes (GST, land tax, stamp duty)

Earning an income

Income generated from your investment property is taxable. However, you are entitled to claim deductions against your property income, the following:

• Rates
• Land tax
• Interest
• Insurance
• Real estate agent management fees
• Depreciation
• Capital works
• And, other expenses incurred to generate income

Negative-gearing

Borrowing to acquire an investment property is a popular and common form of financial leveraging. Often the cost of borrowing exceeds the income received from the property; but it is only a timing issue - incurring losses now in favour of perceived capital gains on sale. The tax treatment of losses incurred can be used to offset other taxable income.

Making a gain

It is wonderful to sell your investment property for a handsome profit however, this may also attract a potential tax liability from capital gains tax.

Tax planning is essential when considering the acquisition and disposal of any investment. It will allow you to explore all strategies or options available to minimise potential capital gains tax.

Cash flow

Whilst we want to look at ways of minimising tax, this should not be your only focus when considering the acquisition and disposal of various investments. Equally important is planning and understanding the investment to ensure you have sufficient and consistent cash flow to sustain the property, personal finance and other pursuits.

We can help in determining the optimum structure for the purchase of your investment property by assessing your current and future income.

Discuss Further?

If you would like to discuss, please get in touch.