Tax Free Benefits

BuildingWA.com.au spoke to Cameron Lade, Sales and Marketing Manager of Dale Alcock Homes, to explain the tax free benefits of real estate investment.

 

"Think of the equity you have in your home as wallpaper made up of your hard-earned cash. What if you take some of this wallpaper and stick it on a different wall, and use the rent from that different wall to offset the repayments?

 

It's called leverage and it's used by all successful investors. It's quite simple."

Cameron explains that an investment home will produce an income through rent; and the house is also eligible for a special building write-off and depreciation. "This means that although you are receiving an income from rent, you can also claim the rent deductions. In a nutshell, this could give you tax benefits of thousands of dollars per year."

The difference between what you receive in rental payment and what you pay on your mortgage is referred to as the 'shortfall'.  Although this amount is an initial cash outlay on your part, the Australian Taxation Office will allow you to claim this amount back.  This concept is often referred to as 'negative gearing'.

Cameron notes "Tax benefits are usually by-product of owning an investment property.  They should only be considered as a secondary reason for wanting to invest.  Long term capital growth is where the true benefits will be realised."