The Australian Government offers significant property investment tax benefits to international investors who own Australian property for the purposes of renting out - be they from South Africa, from the United Kingdom or from China. The reason for this is that there is currently a housing shortage in Australia, which places a huge demand on rental properties. Over 35% of Australians rent homes and it is cheaper for Government to give investors these tax breaks than it is to provide the resources and costs needed to make homes available.
The Government also recognises the need for its citizens to become financially secure in retirement. With the Baby Boomers heading into retirement in the next 20 years, there will be much less tax money going into the tax kitty, and pension as we have always know it will be a lot less, maybe even non-existent. As a result, Compulsory Superannuation was introduced whereby companies have to pay 9%, rising to 12%, of the gross income for each employee into a Superannuation Fund that employees will only have access to when they retire.
What tax deductions can be claimed for an investment property?
Property investment is the most effective way to legally reduce the amount of tax you pay in Australia. The more properties you have, the less your taxable income will be.
- Any shortfall difference between the properties income and outgoings can be claimed every year
- 100% of all interest is claimable. Furthermore, if you take out a loan in another country to cover the deposit, then that amount can also be
claimed against income with the Australian tax department
- Depreciation of the construction of the building at 2.5% over 40 years
- Furniture purchases for short-term rentals can be claimed at 4%
- Depreciation of fixtures and fittings over 5 years, i.e. light fittings, blinds, cupboards, etc.
- Inspection costs (should you travel to Australia to inspect the property)
- Taxation lodgement fees are tax deductible
If you’re looking to migrate to Australia, you can also accrue tax credits until such time as you relocate and this will then allow you to save money in your first year of working in Australia. If you do not plan on moving to Australia, the tax credits will be offset on any capital gains you make when you sell that property and reduce the tax you are liable to pay otherwise.
Contact us to find out more about the taxation benefits that can be achieved.
How does it work?
All property investors must have a tax file number in Australia and are required to lodge a return each year. There are tax treaties between Australia and other countries like South Africa, which state that you do not pay tax in both countries – meaning that you will not have pay tax on rental income provided your property investment is structured right.
Our team of international tax specialists and accountants will ensure you never pay more than required by Australian Taxation Law.
Its just part of the service we provide at PR Australian Properties.