Property Tax, Tips and Trips
Making an investing purely for tax benefits, is not only illegal under Part IV A of the Tax Act, but also not prudent advice from a wealth creation perspective. Many of the property spruikers in the market place, often tout tax as the main reason why an investor should purchase a new property. The real reason why an investor should purchase a new property really is because spruikers don't make money (often very large commissions) off you if you buy a second hand property, of course you won't hear them say that in their presentations.
Whenever someone is talking to you about tax benefits, it is important that they are qualified to do so. If your accountant is getting a commission or a "sales or marketing fee" for a property you are thinking of purchasing, you should seek the advice of an independent accountant that has no conflict of interest in the possible transaction. Most accountants will offer you a complimentary meeting, so take advantage of it and seek a second unbiased opinion. Bear in mind that an accountant can discuss the tax with you, but they are not investment experts. For an opinion on whether the investment is suitable and wise for you and your circumstances, seek a consultation with a financial adviser that has their own Australian financial services licence and that own their business and that is not tied to either an accountant or the firm (property agent or spruiker) selling the property (this means there is no financial incentive that can skew their advice or opinion).
Capital Gains tax exemption and Negative Gearing on Property
Property tax benefits are a substantial tax concession offered by the Australian Government, along with superannuation tax concessions, they make up the two biggest. According to the Gratton Institute, the housing concession with the biggest cost to the federal budget is the exemption of owner-occupied homes (principle place of residence) from capital gains tax. It is hard to quantify, but it estimates that it costs the federal budget about $15 billion a year in foregone revenue. Negative gearing tax concessions on investment properties are estimated to cost between $1-2 billion to the budget per annum.
For a complimentary consultation (or a second opinion) on the tax benefits contact our sister company Navigate Wealth Financial advisers on Ph 1300 505 565 who can discuss the tax benefits of a property investment with you and/or refer you to a unbiased and independent Chartered Accountant in your preferred area.