One of the areas of taxation that give property owners a headache when filing returns is investment properties. An investment property is any property which you purchase with the intention of earning a return on the investment. These can include rental apartments, condos, and even short term investment endeavours such as property that you want to flip. An investment property also includes other things besides housing. It can be collectibles, land or securities. When tackling tax returns, it is advisable to work with a professional who understands the tax implications of having each of the properties. Here are three basic things to know about them.
Tax Implications of Rental Property
Rental property can be classified under residential, commercial and mixed-use. If you have flats, commercial office buildings or industries that you have leased out, and are collecting income from, the Australian Taxation Office expects you to list it as income. Additionally, this income is taxed. A tax expert will help you understand how to file these returns and how you can subtract the expenses that you take from the rental income from the total amount of money that has to be taxed.
Selling the Rental Property
Another issue, which creates challenges when it comes to filing tax returns, is when you have to sell the property. Selling real estate property comes with its own set of tax implications. If you sell it for more than the amount that you invested in, you are considered to have capital gain. This gain should be reported to the Australian Taxation office. On the other hand, if you sold a residential property, you do not have to report any capital gains below a quarter of a million dollars. The taxation expert will teach you the correct procedures to follow when you sell your property, to avoid creating issues with the government.
Loans Attached to Investment Property
The other thorny issue about tax and investment property is when you need to borrow money against it. If you have a mortgage or other credit line attached to your property, the taxation module changes a bit. The tax accountant will understand how to handle taxes when you have a loan or other line of credit.
These are some of the most challenging issues connected to taxation. You need to allow a professional tax accountant to handle all your investment property. When you have an expert dealing with it, you will have fewer tax complications to deal with.
For more tips, reach out to an investment properties tax service in your area.
Share25 June 2020
When I first took over the admin of the company, the records were a mess. I got them mainly sorted out. Then last year my worst nightmare came true, and we got a back audit on taxes from before my time. It was a lot of work, but luckily we have a great accountant who helped us to sort out all of our records and get through the audit. Now we have a bit of tax to pay back, but I know our records are in better order, and if we get audited again, we'll be fine. This blog is all about tax services and auditing.