To assist with consistent cash flow, it’s important that your investment property is occupied by tenants as much as possible.
This may mean taking the time to consider the needs of your potential tenants when you are making a decision on the right investment property for you – such as being close to transport, schools and shops.
Finding the right investment property is achieved by doing plenty of legwork. Fortunately, the online world makes this relatively easy, with online real estate pages which enable you to search for an investment property around the clock.
We’re all accustomed with the “Location, Location, Location” mantra. As a rule, the aim is to buy a quality, well-located investment property, where future tenants want to dwell.
Often, an investment property is likely to be close to facilities such as schools, universities, hospitals, railway stations, decent roadways and even airports. The right investment property will also often be in close proximity to shopping precincts, popular entertainment quarters and parks.
History proves that buying a quality, well-located investment property is very likely to generate long term returns. More importantly, owning an investment property could be a great way to help fund a decent lifestyle after you exit the workforce.
It stands to reason that as a retiree, an investment property that can potentially generate plenty of income, as well as some growth to protect your money against inflation, would make a valuable investment.
In addition to capital growth and rental income, there may also be some tax breaks that may assist with the cost of owning and the selling an investment property. These breaks include the ability to claim expenses, where eligible, such as property management fees, rates and levies, mortgage interest and legal fees as tax deductions.
When the time arrives to sell the property, there is a Capital Gains Tax discount which could potentially reduce your capital gain before tax by 50%. The 50% discount may apply if you have owned your investment property for at least one year.1 To calculate your capital gain (profit before tax), subtract the sales price from the purchase price, less any incidental costs such as legal fees or stamp duty.
For example, let’s assume you made a capital gain before tax, after costs, of $300,000 from the sale of a property. After the 50% discount is applied, the taxable capital gain is $150,000 and this amount is added to your taxable income. The tax that you’ll pay at the end of the financial year will reflect the capital gain included in your income.
Calculating the impact of the sale of an investment property can be a bit complicated, so it’s important that you seek the advice of your financial adviser early on.
1CGT exemptions, rollovers and concessions – ATO website -
This information is current as at 15/08/2016.
This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs.
This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice.
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