Buying and selling property can be a great investment to grow your wealth. However, it’s important to keep in mind tax rules that can affect how much money you keep. Good tax planning is essential whether you rent or sell your property or develop land. Getting professional advice from a Geelong tax accountant can help.
Tax strategies for property investment and development
There are different ways to invest in property. Each comes with its own tax rules. Some investors buy and hold for capital growth. Others use negative or positive gearing. Some focus on subdividing and developing land to increase value. Each approach has different tax costs, including capital gains tax, income tax, and GST. Speaking with a local Geelong accountant near you can help you decide the best property investment strategy for you.
Long-term investment strategy
Buying and holding property is a long-term strategy. Investors will wait for the property’s value to increase while earning rental income. Some tax benefits include being able to claim deductions for the property, such as loan interest, land tax, depreciation, insurance and repair costs.
If you sell your property later, Capital Gains Tax (CGT) applies. You may get a CGT discount if you hold the property for over a year. Speaking with a Geelong tax accountant can help you plan for these tax obligations.
Negative gearing and your tax
Negative gearing happens when your rental income is less than your property expenses. This creates a loss that can be deducted from your other income, lowering the tax you owe. While this can be a smart strategy, you must be sure you can afford the costs. A good accountant in Geelong can help you decide if this strategy suits you.
Positive gearing and extra tax considerations
Positive gearing happens when your rental income is higher than your expenses. This means you make a monthly profit but must also pay tax on that income. You can still reduce your tax bill by claiming deductions like loan interest and maintenance costs. A well-planned tax strategy can help you manage these costs effectively.
Subdividing and developing property
Subdividing or developing land can increase property value and provide strong returns. However, these activities come with tax obligations. Selling the subdivided land may result in being treated as a business rather than having a capital gain event, and may result in higher tax.
You may also have to pay GST on your property development. In certain circumstances GST margin scheme may apply. A Geelong tax accountant can help you understand these rules and structure your development projects wisely.
Choosing the best investment structure
How you own your property can affect how much tax you pay. Owning properties as an individual is straightforward and may allow for CGT discounts, but it can also lead to higher tax bills. Owning through a company may lower tax rates but not qualify for CGT discounts. Using a trust offers flexibility but requires careful management.
Getting expert Geelong tax advice ensures your property investments are structured in the most tax-efficient way.
Get advice from a Geelong tax accountant
Good tax planning helps you keep more of your money. Whether you use negative gearing, subdivision, or another strategy, advice from one of our tax accountants at LBW can help.
Contact our accountants in Geelong or Melbourne for advice on property investments and how they may impact your investment portfolio at (03) 5221 6111 or visit our website at www.lbwca.com.au
This blog provides general educational information only. The content does not take into account your personal objectives, financial situation or needs. You should consider taking financial advice tailored to your personal circumstances.
LBW Business + Wealth Advisors is an Authorised Representative of LBW Wealth Pty Ltd ABN 56 652 382 128 AFSL 534569. Please see our website www.lbwca.com.au or call 03 5221 6111 for more information on our available services.
