Using Your Residence As an Investment Property and Avoiding The Pitfalls

by Dominique Schuh

Although a large number of Australians already own their own home, some people have gone down the path of turning this into an investment property. If you're considering making this move, there are a number of things you should be aware of:

1. Your property will be eligible to receive deductions for depreciation.
Normally a newer property will benefit from being able to claim a greater amount of
depreciation, however all properties should be able to claim something in this area. And for investors who own properties that were built before 15th of September 1987, you can still claim depreciation on the fixtures and fittings in the property. This can also include any recent renovations, even if the renovation was carried out by a previous owner.

2. You'll have some additional tax considerations
As soon as the property becomes income producing, any expenses incurred in holding the property become tax deductible. You should also keep a record of any improvements made to the property while it's being rented, as these may be claimable for depreciation.

3. Capital Gains
If a home has been used as an income-producing asset, a Capital Gains Tax (CGT) event may be triggered when the property is eventually sold. However, there are some circumstances where a CGT exemption may apply, and if you're in any doubt, please feel free to contact us.