Round 16

Tax and investments

Tax is an important consideration for investors, as there are many instances where the tax benefits from such things as franking credits and depreciation can greatly assist with cash flow.

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Property and tax

Buy a property; find the tenant. Take advantage of tax benefits to help pay off the mortgage. When you retire, sell the property, pay out any remainder of the loan, and keep the capital growth to fund your happily ever after. Is it really that simple?

Before purchasing a property

Before purchasing a property it is important to ensure that the correct entity owns the property (see Round 14). The structure you choose will directly affect the amount of tax you pay on your investment.

Principally, the entities that may own property are individuals, either as joint tenants or tenants in common; partnership; superannuation fund; trust or company. It is critical that you make the decision about the entity in which you will buy the property before you buy.

Everyone’s situation is different, and the structure you choose should not be made solely on tax advantages.

During ownership

You will need to be aware of the treatment of the various outgoings associated with property ownership in order to get the maximum tax benefit from your property over the period of ownership. ...

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