Where to Start In Property Investing??
Ok, you want to invest in property to build your wealth to generate a passive income in the future!
It’s important to know a few key things before you start.
What Property Investment Strategy to follow?
There are three main strategies you can use!
1 – Rental Property Investor
(Rental Property Investor intention is to – Buy & Hold)
2 – Property Developers – Passive
These developers are looking to buy residential properties with the intention to – Buy, Develop & Hold)
3- Property Developer Enterprise
These developers are looking to either flip or subdivided to build new properties, with the intention to – Buy, Develop & Sell ASAP)
Each strategy has differing time frames and tax implications to consider for accounting for – Profits, GST, CGT, Land Tax, Stamp Duty, Tax Structures Overlays, and any deemed changes in intentions between the strategies.
What Tax Structure to hold property investments in?
There is a number of tax structures you can use, each with distinct tax implications for holding, developing, estate planning and selling property.
– Sole, Joint or Tenants in Common
Partnerships, JV or Syndicates
– members can be any combination of individuals, partnerships, trusts, companies or SMSFs.
Trust can be either – Discretionary, Fixed, or Hybrid
Companies can have many directors, shareholders can be either individuals, trusts, companies, or SMSFs
Self Managed Super Fund (SMSF)
Up to six individual members can join forces to invest and develop properties.
Joint Venture (JV)
A (JV) is a cooperative agreement between parties that contribute resources (such as money, skills, assets) to acheive a common goal to develop property for the benefit of each venturer.
What Tax Issues to consider?
The investment strategy(s) and tax structures will collectively create opportunities and threats to the tax planning available and payable.
Smart Property Taxpayers should understand and model the different strategies and associated tax treatments to drive their involvement and strategy used to build wealth. In property development, sometimes less work can mean more after-tax gains!
Profits on Sales (CGT)
Profits could be on Revenue or Capital Account (CGT)
Profits are assessed by, time, intentions, involvement, location and tax structuring.
Could be on Revenue or Capital Account
Stamp Duty on Purchase
Will be affected by Tax Structuring, values and state locations
Land Tax levied annually
Will be affected also by tax structuring, value and locations
Goods and Service Tax (GST)
Needs to be considered if using investment strategy 2 or 3, or changing intentions in 1,2 or 3.
Taxation & Accounting for Property
Before investing in property, it’s critical to consider your intentions, investment strategy, time frames and tax structures. This will form the foundation of your property investment journey.
Getting it wrong may mean the difference between making a profit or not, and paying much more tax than planned on any profits or capital gains in the future!
One of the biggest impediments to building wealth will be unnecessary taxes!
Let’s look for the opportunities, rather than deal with the consequences of poor planning and ill-advised tax structuring for your preferred property wealth strategies.
Ready to take the next step?
Book an Appointment
Careful consideration of your property strategy(s), and tax structures will have a profound impact on your future profits and gains.
Book an appointment today, to ensure you can maximise your tax opportunities, and not have to deal with tax problems down the track!
The best time is before you start any project, the next is ASAP, to see how we can mitigate any tax problems that you may not be aware before it is too late.