Property investment can help to secure your financial future, but navigating the complexities of the process can be perplexing.
While many investors focus solely on finding the right property and securing tenants, they often overlook the critical role an accountant can play in their investment success. From maximising tax deductions to ensuring compliance with tax laws, a skilled accountant is more than just a number-cruncher – they are your certified accountants in the property investment game. By enlisting the help of a skilled investment property accountant, you can get answers to all your questions about property investment and ensure that your endeavour is both lucrative and regulation-compliant.
Tax Benefits of an Investment Property
Along with the added income from rental payments, one of the most attractive aspects of property investment is its tax advantages. Savvy investors can claim numerous deductions that help reduce their overall tax burden. While your rental income is taxable, you can offset this with deductions for expenses like mortgage interest, property management and body corporate or strata fees, council rates, insurance, and maintenance costs.
Tax deductibles
Depreciation is another significant benefit, allowing you to claim deductions for the wear and tear of your property’s structure and fixtures over time. Property investors can also benefit from negative gearing – where if your annual property expenses exceed your rental income, you can offset these losses against your other taxable income.
Capital gains tax
The ultimate prize comes when you sell: if you’ve held the property for more than 12 months, you’ll only pay capital gains tax on 50% of your profit. This makes property a particularly tax-effective investment strategy when compared to many other investment options.
Investing in Property Through Your SMSF
Super Funds (SMSFs) offer a unique pathway to property investment that can provide significant advantages over traditional purchasing methods. Unlike regular super funds that are managed by large providers, SMSFs give you direct control over fund management decisions. The tax benefits are particularly attractive – your SMSF pays just 15% tax on rental income, which is significantly lower than personal income tax rates. Better yet, if you sell the property once your SMSF is in the pension phase, you could pay zero capital gains tax. Even during the accumulation phase, capital gains receive substantial discounts.
However, strict rules apply, which is where an experienced investment property accountant can provide essential guidance. The property must be for investment purposes only, meaning that neither trustees nor family members can personally use or benefit from it. Property purchases typically occur through Limited Recourse Borrowing Arrangements (LRBA), which provide additional protection for your SMSF’s other assets. Under this structure, your SMSF receives the beneficial interest in the property while legal ownership is held in trust until any loan is repaid.
Why You Need an Accountant for Property Investment Success
The success of a property investment relies on the expertise applied to decision making, which is where accountants play a crucial role. They can leverage expertise in making strategically informed decisions to maximise returns while minimising risks through careful financial planning and management.
Navigating the complex web of rules and regulations surrounding property investment can be overwhelming, especially with SMSF arrangements. An accountant’s proficiency ensures you remain compliant while taking advantage of all available benefits.
Your accountant’s tax planning strategies can make a substantial difference to your bottom line. They’ll help structure your investment to maximise deductions, manage depreciation schedules, and optimise your tax position, whether you’re investing personally or through an SMSF. By working with an experienced property accountant in Melbourne, you can avoid common pitfalls and make informed decisions that align with your long-term investment goals.
Trust the Experts
At Stones Sharp, our various accounting services are managed by industry-leading experts you can trust. Contact us to find out more about our comprehensive accounting service offerings and how we can help to secure your financial future.
