Investors could be paying too much tax
If you are buying an average home in Sydney or Melbourne for investment purposes, it is likely that you will pay more than $30,000 in stamp duty costs – the equivalent cost of buying a new SUV.
In these two booming real estate markets, governments are enjoying a financial bonanza in property taxes and this is set to continue during this year, with property prices expected to rise even further in Sydney and Melbourne.
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However, it is worth remembering that in other capital cities throughout Australia, property investors are also being hit hard by taxes.
For example, even in the depressed property market of Perth, an average property investor is paying over $17,000 in stamp duty.
Overall, all levels of government throughout Australia collect more than $45 billion annually in property taxes.
Since 2010, annual property tax collections by government have surged by 42 per cent throughout Australia, compared with an overall increase in government taxation collections of 33 per cent during this period.
In comparison to the 42 per cent surge in property taxes, total GST collections have increased by just 17 per cent since 2010.
The accelerated growth in property taxes compared to total taxation revenue means that governments throughout Australia are now collecting more than $11 billion in property taxes.
To reduce this growing taxation burden, more property investors are taking advantage of legitimate tax benefits that flow from investing in property taxes such as depreciation.
Just one tax depreciation report for an investment property can generate thousands of dollars in potential savings in tax each year.
Tax depreciation benefits associated with owning investment properties can be equivalent to around 60 per cent of the annual rental income of an investment property.
For the initial cost of the tax depreciation report, which is tax-deductible, clients can achieve thousands of dollars in tax benefits each year from their investment by legitimately claiming their full depreciation allowances.
Even an older-style home can qualify for substantial tax depreciation benefits if a depreciation schedule is undertaken around the time of settlement.
For people in Australia who buy an investment property, they have to understand that they must undertake a tax depreciation schedule as soon as possible after settlement so that it complies with ATO guidelines.
To protect their interests and ensure that they select a company that is fully compliant with ATO rulings, property investors should select a company that is a member of The Australian Institute of Quantity Surveyors (AIQS).
DEPPRO is an associate member of the AIQS and uses systems that are fully compliant with ATO rulings.
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