Investing in property is an investment in the future. The property market in Australia is skyrocketing, and with record low interest rates, now is a good time to buy.
If you are an expat looking to invest in an Australian property, there are a few things you need to understand before you invest.
What is negative gearing?
Negative gearing is a term that was prominent during the Federal election, defined as when an investor borrows money to purchase a means of income, typically property or shares. Negative gearing is a form of financial leverage where the investor foresees that the growth in the investment’s value will offset the rate of holding or owning the asset.
A property is said to be negatively geared when the income from the rent is less than the collective costs of holding the property. This includes both cash and non-cash deductions. Cash deductions include:
– Interest on the loan used to buy the home
– Body corporate fees
– Council rates
– Insurance
– Maintenance fees and costs
Non-cash deductions include rental property depreciation. This is where you can claim a tax deduction for the loss of value due to improvements to the home.
Expats and negative gearing
If you are a non-resident for tax purposes, expat Aussies can negatively gear their investment property. This means you can utilise any tax losses on investment properties in Australia. This reduces your taxable income in your Australian tax return from other sourced income from Australia.
Tax losses that are more than your sourced Australian income can be carried into future tax years. To get the most out of your negative gearing and tax benefits, you need to maximise your depreciation deductions.
Call the experts
As Australian expats, we know the Australian property market. Using the latest technology, we will advise on the best investment strategy to secure your financial future. As a non-resident Australian living overseas, you can still have a viable stream of income.
If you would like to know more about investing in an investment property in Australia, contact Expat Tax Services. We can help you get the most out your negative gearing and tax benefits.
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