Tax Advantages of Investment Properties That Every Real Estate Investor Should Know

June 3, 2022    Tax Return Perth

Property is one of the most popular investments any astute Australian might own. Everyone has a seat at the table to build wealth through real estate. To help you get started, we’ve put together a quick guide to investment property tax return and their benefits in Western Australia to help you understand the basics.

Western Australian Property Financing

Few people in WA will be able to afford their first real estate investment without borrowing money. Peer-to-peer lending is a possibility, as is borrowing through a bank or another type of lender. Shop around for the greatest bargain regardless of who you choose to work with, and you’ll never regret it.

Brokers can be extremely useful in this regard, but be careful of any prejudices they may have.

You must verify that the financial expert has the proper licenses and uses ethical business procedures while working with them for your protection.

What Are The Advantages of Real Estate Investment?

Investors can enjoy several long-term financial rewards by investing in real estate in Western Australia, a popular investment.

For various reasons, investing in real estate is a popular choice for many West Australians. Here are some advantages of real estate investment.

  • Helps Financially

When you invest in real estate, you can see a large boost in your net worth over the long term. Over time, the market worth of your home will almost probably rise. So you can earn additional revenue from your investment property if the rent you collect exceeds your costs.

  • One of The Most Secure Ways to Invest

Due to its relatively low level of fluctuation, investing in real estate is typically considered the safest of all possible investment options. A solid cash flow from the property also gives you a quick return on your investment, allowing you to start making money almost immediately. As a physical asset, your investment can be insured, which reduces risk while also giving you more control over your returns.

  • You Get a Break From Your Taxes.

Although tax returns in Perth advantages should not be considered a deciding factor, they might be a benefit of property investment. Investment property expenses, such as property upkeep, council rates, and fees for a property manager, be recouped at the end of the financial year. Negative gearing is a tax benefit you may be able to take advantage of if your expenses outweigh your rental revenue.

Is Property Investment Costly?

When thinking about investing in the rental market, many individuals ask this question, which is crucial to consider. Many individuals discard this option before investigating it. They run from the cost of a home or apartment.

Rental property tax return investments offer several tax deductions. Let’s examine each one’s tax return in Perthbenefits.

  • Passion

Investing-related loan interest is tax-deductible. An example would be interest accrued on a mortgage on an investment property or money borrowed to buy stock.

Consider a $500,000 mortgage for a rental property with 5% annual interest paid monthly over 30 years. This loan’s interest costs $15,542 per year. That’s a $15,542 tax deduction for your investment property.

  • Rent

As a landlord, you can claim various expenses to reduce your annual tax return in the Perthbill. Common immediate expenses include:

  • Tenant advertising
  • Corporate fees
  • Taxes
  • Costs
  • Property tax
  • Cleaning
  • Gardening
  • Exterminator
  • Insurance
  • Agent commissions
  • Property upkeep
  • You can claim travel for inspections or rent collection.

You could reduce the same amount of tax you owe when you claim these rental investment property tax return expenses as tax deductions.

  • Building Depreciation

Buildings, like automobiles and other assets, deteriorate over time. Depreciation reduces the value of objects.

The best things for your investment property tax return, and some seasoned investors examine it before buying a new property.

Depreciation is a built-in tax deduction, so you don’t have to pay for it on an ongoing basis. Instead, you claim the building’s depreciated value as a “non-cash deduction.”

If the building was built after 1985 and is utilized for investment, you can claim depreciation on your tax return in Perth and save thousands without spending extra money.

  • Fittings Depreciation

This deduction is comparable to building depreciation. However, it applies to investment property fixtures. Lights, fans, power points, windows, sinks, showers, etc., all depreciate over time.

Qualified building surveyors may assess depreciation on fixtures and buildings, detailing how their worth diminishes over time. Depreciation rates range from 2.5% to 4% of the price paid for buildings and assets, leading to considerable tax benefits.

  • Interest

Interest is the biggest loan expense, but other fees quickly pile up, as everyone with a mortgage knows.

Loan setup fees, account administration fees, mortgage insurance fees, mortgage registration, mortgage broker fees, and stamp duty typically be deducted for investment properties (not the property). Most of these claims are made over five years as part of borrowing expenses and can add up to hundreds of dollars each year.

  • Depreciation

Holding costs involve buying land before construction. When you buy land with plans to develop, you must pay both land and construction interest. These charges are called holding costs, or what you spend to “hold onto” the property until renting it.

New property investors typically ignore or don’t comprehend holding fees, one of the biggest tax-deductible expenses for investment property. Instead, they may choose established buildings and properties, missing out on tax savings.

  • Accounting Costs

Not everyone realizes that paying a tax accountant in Perth to handle their tax returns can help them pay less tax. The fees you pay for managing your tax affairs are tax deductible every year. They give you access to professional accounting advice that may help you minimize your tax.

Tax preparation and filing fees, travel expenses for professional tax counsel, and any tax appeals filed on your behalf are all included in this cost. You can also claim fees for appraisals you need for specific tax deductions, such as depreciation reports.

All of these things are tax-deductible when you own an investment property. You can save on taxes and offset the property’s cost by totaling them up precisely.

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