206 Natura

• Research: Understanding the property market, identifying potential locations, and deciding on the type of property.
• Financial Assessment: Evaluating your financial situation and determining how much you can afford to invest.
• Pre-Approval: Obtaining pre-approval for a mortgage to understand your borrowing capacity.
• Property Search: Working with real estate agents or property consultants to find suitable properties.
• Due Diligence: Conducting thorough checks, including building inspections and reviewing the property’s history.
• Purchase: Making an offer and negotiating the purchase price.
• Settlement: Completing legal and financial formalities to take ownership of the property.
• Management: Deciding whether to manage the property yourself or hire a property manager.

• Residential properties (houses, apartments, townhouses)
• Commercial properties (offices, retail spaces)
• Industrial properties (warehouses, factories)
• Land for future development

• Home Loans: Securing a mortgage from a bank or financial institution.
• Equity Release: Using equity from an existing property as collateral.
• Self-Managed Super Fund (SMSF): Using your superannuation savings to purchase property.
• Joint Ventures: Partnering with other investors to share the financial burden.

• Negative Gearing: If your property expenses exceed rental income, you can offset the loss against your other income.
• Depreciation Deductions: Claiming deductions for the decline in value of the building and its fixtures.
• Capital Gains Tax (CGT) Discounts: A 50% discount on CGT for properties held for more than 12 months.
• Interest Deductions: Deducting interest paid on the mortgage.

Property depreciation refers to the decline in value of a property and its fixtures over time. Investors can claim depreciation as a tax deduction, which reduces taxable income and increases cash flow. Depreciation deductions are typically higher for new properties due to the value of newly constructed buildings and modern fittings.

• Obtain a Depreciation Schedule: Hire a qualified quantity surveyor to prepare a detailed depreciation schedule.
• Claim Both Capital Works and Plant & Equipment: Ensure you claim deductions for both the building structure (capital works) and the fixtures and fittings (plant & equipment).
• Keep Records: Maintain accurate records of purchase costs and improvement expenses.

Negative gearing occurs when the expenses of owning an investment property (such as mortgage interest, maintenance, and management fees) exceed the rental income. The loss can be offset against other income, reducing your overall tax liability. This strategy is popular in Australia as it can provide tax benefits while waiting for capital growth.

• Market Fluctuations: Property values can decrease due to economic downturns or market oversupply.
• Interest Rate Changes: Increases in interest rates can raise mortgage repayments, impacting cash flow.
• Vacancy Periods: Periods without tenants can result in lost rental income.
• Maintenance Costs: Unexpected repair and maintenance expenses can reduce profitability.
• Regulatory Changes: Changes in tax laws or property regulations can affect returns.

Capital gains tax (CGT) applies to the profit made from selling an investment property. If the property is held for more than 12 months, individuals and trusts can receive a 50% discount on the capital gain. The gain is added to your assessable income for the year and taxed at your marginal tax rate. There are no CGT discounts for properties held for less than 12 months or for companies.

You can claim tax deductions for expenses related to managing your investment property yourself, including:

• Travel Expenses: Costs of traveling to inspect the property or carry out maintenance (note: recent changes limit deductions for travel expenses).
• Office Supplies: Costs of office supplies and equipment used for managing the property.
• Property Expenses: Interest on loans, property management fees, maintenance costs, and insurance.