Property investment allows buyers to have the luxury of certain tax benefts; however as an investor you will also incur additional taxes. The following provides a breakdown of taxes related to property investment.
Tax Incurred by an Investor
There are several taxes that you will incur when acquiring and owning an investment property:
You will be required to pay tax on income (rent and any other money) which you receive from your property. This may be offset however, by interest repayments on your loan as well as other deductions (refer to page 10 for more information).
Capital Gains Tax (CGT)
Capital gains tax is required to be paid on any proft made from your investment property once sold.
The applicable rate of CGT is the same as the income tax rate which you pay, however if you have owned the property for more than 12 months, you gain a 50 percent discount on the capital gain.
Sometimes referred to as council rates, this local tax typically funds local government investment and expenditure, such as rubbish collection, parks and public facility maintenance and other community services. The frequency and amount of tax will depend on the local municipality and the market value of your property.
Land tax is imposed by all state and territory governments, excluding the Northern Territory. It is payable based on the combined unimproved value of the land you own and is calculated on what your land would be worth if it was vacant; therefore it does not include existing dwellings on the property. Land tax is payable on all property you own, except your principal place of residence. The amount of this annual payment will vary by locality. Contact your relevant state authority for more information.
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