Taxes & Commercial Property Investment

One of the foremost advantages of commercial property investment is the generation of cash flow without any focus on the outgoings.

Individuals who invest in commercial property pay tax at their marginal rate on all net rental income earned, as well as capital gains tax on any profits made from the sale of that property.

Buying commercial property also means that you can benefit from negative gearing, allowing you to offset any investment property losses against personal taxable income. Not only will this reduce your individual tax bill overall, but consequently it allows ownership of properties you wouldn’t have otherwise been able to afford.

Another major benefit of individuals purchasing commercial property is you may be entitled to a discount of 50% in capital gains. So as long you own the property for over one year before it is sold, your assessable income will only have half of any capital gain added to it.

Owners of commercial property can claim deductions for most of the property’s running expenses. This includes management expenses, advertising fees, travel costs to visit the property, and depreciation of the structure itself.

Investors will need to know what annual deductions they can legally claim for capital works like renovations and remodelling, depreciating assets like appliances, and any immediate deductions, such as insurances, property loan interest, land tax, as well as repairs and maintenance. These also should be added to the cost base of the property to help reduce the Capital Gains Tax.

The Australian Taxation Office is consistently auditing any deductions claimed by property investors. Hefty fines and penalties apply to anyone who fails to declare income or who attempt to claim ineligible expenses, such as claiming property renovations were done by others when in reality, they were carried out by you.

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