Tax and Gearing

It’s important that your investment property loan gives you the maximum tax benefits. Your Smartline mortgage broker can help you make sense of all the tax-talk and show you the pros and cons of different options.

Some quick answers to get you started

What’s a negatively geared investment property?

It’s when your mortgage interest and other costs e.g. maintenance fees, rates, etc are more than your rental income. The loss is offset against your other income e.g. your salary, which then reduces your tax bill.


Why negatively gear?

The taxman and your tenants help pay for your investment property. Ideally, your property goes up in value in the meantime.


What is a positively geared investment property?

It’s when your rental income is more than the mortgage interest and costs of the property. So you are making money that can be used to repay the loan.


What is depreciation?

The depreciation in the value of items each year is a big tax advantage of property investment. Specialist companies can inspect your property and estimate the cost of the building’s capital works, value of fixtures and fittings, etc – and make sure you get all the deductions that you are entitled to.


What is capital gains tax?

It’s a tax on investment properties purchased after 19 September 1985. It’s based on the difference between the selling price and the purchase price (including legal fees, stamp duty and other upfront costs). Capital gains tax can be complex, so be sure to talk to your accountant.


What is land tax?

Land tax is an annual tax based on land value only and is tax deductible on any income-producing property.


Can I claim GST concessions?

GST doesn’t apply to residential property rental income, so investors can’t claim it for general property expenses. Also, there’s no GST on interest and mortgage repayments, bank charges or council and water rates.