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New research suggests that many Australians could be missing out on the opportunity of buying an investment property due to poor financial knowledge.

A new State Custodians survey of 1,006 people nationwide has found that less than half of Australians have any idea about the main tax deductions which are claimable on investment properties.

These include real estate management fees (only 44 per cent aware this is a deduction), depreciation on appliances (42 per cent), interest payments on the mortgage (39 per cent), building and pest inspections (37 per cent), depreciation on construction costs (36 per cent), damage from tenants (35 per cent), advertising for new tenants (34 per cent) and gardening (27 per cent).

Making the decision to buy an investment property can produce a windfall but it can also be complicated. Investors need to be able to weigh up the likely capital gain against the costs of buying, maintaining and borrowing finance to fund the purchase.

Joanna Pretty, General Manager, State Custodians

"It’s therefore important that people take the time to educate themselves by understanding what is claimable, as otherwise they may dismiss the idea of buying an investment property, when in fact it may be entirely do-able," admits State Custodians' General Manager Joanna Pretty.

Of concern is the fact that women surveyed have generally less awareness about tax deductions on investment properties compared to men. Only 23 per cent of women are aware of stamp duty tax deductions compared to 28 per cent of men, 40 per cent of women know real estate management fees are tax deductible compared to 49 per cent of men, and 39 per cent of women understand that depreciation on appliances is a tax deduction versus 45 per cent of men.

This is despite the fact that nearly half (47 per cent) of Australians who own investment property are women, according to data analysis from the Australian Taxation Office by the Property Council of Australia.

Young Australians 18-34 years are also much less clued up on the issue compared to those 35 years plus. The topics with the biggest differences in knowledge include: depreciation on new appliances (24 per cent knowledge compared to 47 per cent), real estate management fees (27 per cent knowledge compared to 50 per cent) and interest payments on your mortgage (23 per cent knowledge compared to 44 per cent).

According to the ATO these expenses can immediately be deducted:

  • Real estate agent fees and commission
  • Interest expenses
  • Advertising for tenants
  • Repairs and maintenace
  • Council rates and water charges
  • Body corporate fees and charges
  • Cleaning and pest control
  • Land tax
  • Building, contents and public liability insurance
  • Gardening and lawn mowing
  • Certain legal expenses

Over a longer period of time these other expense can also be claimed:

  • Depreciation of new assets including furniture, appliances and carpet
  • Capital works such as renovations, building costs and additions
  • Borrowing expenses including lenders mortgage insurance and loan establishment fees

"As the ATO has readily available information on what is claimable, it really pays to do a bit of research and check it out," says Ms Pretty. "With housing now unaffordable for many people – particularly young people in major cities – alternate strategies such as ‘rentvesting’ in order to get a foot on the property ladder are becoming more and more popular. To get the most out of this strategy, understanding the associated tax deductions is highly advisable."

  • Use a calculator to get an estimate of how much you can borrow.
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    click here.

  • Call our Lending Specialists and they can do the calculation for you over the phone plus answer any questions you have at the time. Talk to us on 13 72 62.