4 Types of Taxes When it Comes to Investing and What you Can Claim Back

Capital Gains Tax (CGT)

Capital Gains Tax is the tax on the profit made when you sell an investment property. The taxable amount is calculated by taking the purchase price from the sale price. There are a variety of ways you can receive a tax deduction from Capital Gains Tax, these include:

• Buying and Selling Costs: Legal fees, real estate fees, advertising costs and so forth can be claimed
• Discount Method: If you hold the asset for more than 12 months, you may be eligible for a 50% discount on your capital gains tax
• If the property is your primary place of residence and has not generated any income, you may be exempt from paying CGT
• Capital Improvements: Any costs from renovations or extensions can be added to the cost price of the property and reduce capital gains tax
• Small Business CGT concessions: The 4 concessions include small business 15-year exemption, small business 50% active asset reduction, small business retirement exemption and small business roll-over.

Income Tax

Any income made from investment properties is considered taxable income. Any property expenses such as repairs, renovations, property management, council fees and interest payments are tax deductible and will reduce your taxable income.

Investors can also claim depreciation on any appliances or fixtures for the property. Depreciation claims allow you to deduct the depreciation in value over a period of time, in this case, years and thus generating savings in your taxes.

Goods and Service Tax (GST)

GST is applied to the sale of new residential properties. Investors who buy these new residential properties are usually eligible for GST credits. These credits are also known as Input Tax Credits (ITCs). ITCs can offset the GST paid on the property. Some expenses that may be eligible for ITCs include:

• Property Management Fees: The GST component of property management fees can be claimed as ITC
• Repairs and Maintenance: Any repairs made on the property such as plumbing repairs, repainting etc can have their GST component claimed as an ITC
• Renovation and Improvements: Typically, GST paid on construction services or materials may be eligible for ITCs