A common question we get asked “is an investment property tax-deductible”. Over the last 12 months, there have been many notable schemes promoted by state and federal governments to assist businesses and individuals with much-needed tax relief. Numerous relief schemes have been put into place to help those with rent relief for their businesses.
Rent is a significant business expense. It is one that many businesses across the country have often had to face in one way or another.
To address the issues that many businesses faced with lockdowns and cashflow issues. As a result, some businesses were eligible to apply for rent concessions due to the impact of COVID-19. Concessions could be either a waiver or a deferral.
Waiver
If a waiver is the available rent concession, the tenant no longer needs to pay the rent waived.
Deferral
The tenant pays the rent at a later date.
Tenants who receive rent concessions from their landlords and landlords who give rent concessions to commercial tenants must be aware of the difference between waived and deferred payments. Getting the two wrong can be costly, as rent payments often significantly impact the cash flow. Missing payment due to misunderstanding the rental concession type could be detrimental.
Is An Investment Property Tax-Deductible
Property and tax is a tricky subject that goes beyond these rent relief measures and concessions. As the schemes start to dial back, it’s important to remember that tax and your dealings with a property are ongoing conversations you may need to revisit and reacquaint yourself.
If you own, lease or rent a property used for business purposes (whether commercial, such as a shop or an office, or even your own home), you need to be aware of the tax implications and obligations you will have to fulfil.
If you own a property you:
- must include any rental income in your tax return
- can claim deductions for some property expenses
- will be liable for capital gains tax on any capital gain if you sell the property
- may have GST obligations and entitlements.
You will also likely have additional tax obligations in your dealings with property, including those relating to one-off transactions (such as the buying, selling, leasing or developing property).
These dealings could result in the Australian Taxation deciding that those one-off transactions should deem you as conducting an enterprise. You will need to register for GST if you are seen as conducting a business and the turnover from these activities exceeds the registration threshold.
Please consult with us to ensure that you meet your tax obligations and consequences. You can also enquire about potential tax concessions surrounding rent and property with us, as there may be more available to you and your business than you might think.
