There is a big difference between tax minimisation, and tax avoidance. The “rules” are created by the ATO, and so long as we remain within the boundaries of those rules, we are fine. That is called tax minimisation.

Tax avoidance on the other hand, is knowing and understanding those rules, but choosing not listen to them. That is a very terrible course of action to take, as with most things, you will get caught out eventually! Avoid any tax professional that encourages tax avoidance at all cost because it will cost you later on, not them.

Let’s face it, everyone wants to pay less tax. There is no shame in admitting this and finding the right professionals to help you achieve it. Find an accountant who knows the ATO rulebook inside out, and knows how to play the game within the guidelines.


Below are 8 strategies that will assist you in using your investment property as a tax reduction tool:

1. Depreciation - we cannot emphasise how important this is, and how it can really change your outcome. Many investors have heard about it, vaguely know about it, or have been left completely in the dark by their tax advisors (yes, this is true, from our experience with new clients).
We see some investors using an inappropriate schedule that underestimates the depreciation claim. Even old properties can have a reasonable deduction so use a specialist quantity surveyor to prepare the schedule. It is worth every dollar that you spend.

2. Structure of the purchase – who should own the property? Should it be 50/50? Would that be in the best interest of the family? What about future plans if you are thinking of starting a family? The negative gearing on your property for the non working spouse will lay dormant until they return to work.

3. Other structures – if properly structured, with the right advice, you can use trusts to legally structure your tax affairs, in the best scenario possible. Yes, this is a true hidden gem!! Additional benefits include asset protection and estate planning too!

4. Interest deductions – where you borrow money to purchase the investment property, it is tax deductible. This is the case even if you used your family home as security. If you borrowed from say, a line of credit or a personal loan to fund the deposit or stamp duty, the interest on this loan is tax deductible too!
This sometimes gets overlooked, and sometimes only the main loan is claimed as a tax deduction. An accountant that knows what they are doing will account for all expenditure, and determine its source.

5. Settlement expenses – if you have purchased a property, and the property is tenanted at settlement, don’t overlook the council rates and strata levies that may have been prepaid for the financial year! This is on your settlement statement from your solicitors.

6. When conducting renovations, you should ensure that the quantity surveyor prepares a scrapping or demolition schedule to place a value on all items being thrown away or demolished for an immediate tax deduction and on completion of the renovation or construction a new depreciation schedule should be provided.

7. Have you refinanced on your investment property loan? Any borrowing expenses left from the original loan can be claimed outright. This is commonly overlooked, as the information is historical and it can mean missing out on claiming tax deductions in the thousands.

8. Are you thinking of selling an investment property? The timing of the sale is crucial and we cannot emphasis how important it is to plan. Especially if the property was previously your PPR (principle place of residence).

If you are selling multiple properties, even more reason to plan and stagger the sale where possible. It is important to bear in mind that tax is triggered on the date of contract not on settlement. If an investment property is sold after 12 months then a 50% capital gains tax discount applies.
And, as an added bonus, If you have sold a property that was previously used to operate your business, you may be eligible for the 50% small businesses exemption (active asset) on top of the 50% CGT general discount.