Investment Property

What is an investment property?

An investment property is a real estate asset purchased with the intention of generating income or appreciation over time, rather than for personal use. Investors typically buy these properties to rent them out to tenants or to sell them at a profit in the future. 

What deductions can you claim on an investment property? 

On an investment property, you can typically claim deductions for expenses related to owning and managing the property. These deductions may include interest on loans and maintenance costs. 

When selling an investment property, you can also claim expenses such as: 

• Advertising and marketing costs
• Conveyancing fees
• Appraisal fees

By claiming these deductions, you can lower your taxable income and ultimately pay less in tax. 

Do you have to pay capital gains tax after selling an investment property? 

If you’re selling an investment property, chances are you’ll be paying capital gains tax (CGT). However, how much you pay primarily depends on when you sell the house in relation to when you first bought it. 

If you sell your investment property within 1 year after buying it, 100% of your capital gain will be subject to capital gains tax. Suppose you’ve just sold your property after 2 months of holding it and made a capital gain of $10,000. Assuming a tax rate of 20%, the entire $10,000 is subject to a capital gains tax of $2000. 

The good news is that selling after 1 year of holding your property means that only 50% of your capital gain is subject to capital gains tax. By using the same 20% tax rate and $10,000 capital gain from the example above, this would mean that you would only have to pay $1000 in taxes since only $5000 is subject to capital gains tax.