Australian Taxation
This article is for French investors living in France.
This article aims to show you the outline of the Australian taxation..
Tax laws are constantly changing and we highly recommend to hire a specialist for all questions relating to taxation.
Finally, calculations and tax implications will vary depending on your country of residence: presence or absence of a tax treaty with Australia (impact on the estate).
As you will read below, there are many possible tax deductions.
- General Principles
GROSS INCOME – DEDUCTIONS = INCOME TAXABLE
INCOME TAXABLE X 32.5% = TAX PAYABLE
INCOME TAXABLE – TAX PAYABLE = NET INCOME
- Definitions
GROSS INCOME = any gain perceived in Australia (interests, rents, dividends, etc.).
DEDUCTIONS = charges, expenses, depreciation related to gross income.
- Advantages of the Australian tax system
- No inheritance tax in Australia.
Be careful, this advantage is particularly useful if your country of residence has no tax treaty with Australia (New Caledonia, Polynesia, etc.).
- Income and deductions are grouped
Tax deductions of one property can be used to reduce the income taxable of another property.
Ex: Property A paid cash and Property B paid with a home loan.
In this case, the loan of Property B will reduce the taxable income of both property A + B
- Interests related to a loan are deductible without limit of amount or duration
Be careful, this only applies if the loan is granted by a bank in Australia
- New residential property is depreciable
Without going through a company, an individual can deduct from the rental income the depreciation of his property.
Depreciation is a purely accounting concept: A property has a theoretical fiscal life of X years. Then, we divide the value of the property by this number of years to obtain the depreciation.
Example A $400,000 new apartment bought in Sydney
Fiscal Lifetime: 40 years
Depreciation = $400,000 / 40 years = $10,000
You can deduct $ 10,000 of your income.
Carefull
This deduction is valid only if the calculation is done by an accountant approved by the Australian Taxation Office.
The calculation is different depending on the acquired property(apartment or house because the land value does not count).
- Everything you spend on your property is deductible
The list is long but here are the most significant elements :
– Interests related to bank loan (with no time limit or amount)
– Depreciation (see above)
– Improvements (lighting, furnitures, curtains, appliances, etc.).
– Purchase costs (notary, other)
– Development costs (including rent condo fees)
– Maintenance costs (repairs, improvements, maintenance)
– Municipal fees (garbage, sewage, etc.).
– Water (always the responsibility of the owner in Australia)
– Accountant (for your tax returns)
– Insurance
The Australian Taxation Office even permits to claim one return ticket per year per owner from its primary residence!
Download the official text of articles deductible.
- 50% tax allowance on the capital gain after a year
If you sell your property at least 1 year and 1 day after your purchase, tax allowance on the capital gain decreases by 50%.
Our business is real estate and we are also here to advise you and help you. However, we stronlgly recommend you to seek advices from a professional in taxation.
Lionel