Taxation

Tax issues surround a non resident property investor may varied from country to country hence we will attempt to examine the tax benefits of owning investment property in general only.

Tax Deductions

If you own an investment property or in the business of owning investment properties, income generated from rental are taxable. The rental income will be taxable in the country where the income is generated or where the property is situated. In short, if your property is in Melbourne, the rental income will be taxable in Australia based on the Australian tax rate.

How to reduce the tax payable?

The most effective way to reduce the tax payable is by claiming tax deductions.

What is tax deductible?

There are three (3) main categories of rental expenses which can be deducted against your rental income:

  1. Expenses that can be claimed immediately – travel expenses ( such as air ticket/ accommodation/ food/ travelling relating to inspecting your property), property agent’s fee, body corporate fees and charges, property and landlord insurance, land tax, advertising and other cost relating to leasing the property, book keeping and tax consultancy fee
  2. Expenses that can be claimed over a period of time – borrowing expenses, depreciation on property and fittings etc
  3. Interest on loans and bank charges. This may well be the largest tax deductible item for a property investors. If the interest paid for any year exceeds the net rental income ( after expenses), then the excess may be carried forward and deducted from rental income for the following year.

It is important to understand that in most country, the Inland Revenue will only give you ONE ‘bite of the interest cherry. In other words, only the interest on the amount of the loan originally used to purchase the property will be tax deductible.

Example : When you buy a property A worth $100,000 and decided to take a loan of $80,000. The interest on the entire $80,000 will be deductible against your rental income from property A.

Example : If you paid cash for property A, decided to refinance the property years later, the interest for the loan will not be deductible against any income from property A. This is where most cash rich Asian based investors are not well advised.

How much income tax do i have to pay?

The taxation issues relating to property investment are complicated and require interpretation based on your individual circumstances. Our panel of accountants will be able to assist you here.

Learn more about the following topics from our events.

  • Tax Implications
  • Income tax
  • Capital Gain tax
  • Estate duty
  • Negative Gearing (for Australia only)

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The 4-Steps Process

Step1
Understanding what you want

Step2
Matching your investment objective
with the right property

Step3
Getting into Action
Financing
Leasing and Management
- Taxation

Step4
Review and monitor