AUTHOR

David Johnston
David Johnston
Partner

Are you planning to engage in property investing for your retirement? To build up a portfolio? Or are you just looking for negative gearing tax breaks now?

Property can provide tremendous capital growth and is a very popular investment for many Australians. However, getting it right at the start can make the rewards at the end eAre you planning to engage in property investing for your retirement?ven greater.

Investment in property is a significant investment, and people have different plans for what they want to achieve from their property investments.

Will the property be a future retirement or family holiday home, do you want to eventually pass ownership on to your children, or are you looking to get tax advantages from negative gearing before selling the property off to fund your retirement?

Maybe you want to build a portfolio of properties with different plans for each of them. Are you looking to build your property investment portfolio? Or maybe you’re not sure?

Here are 5 essential property investment tips from our accounting and business advisory teams.

1. GET YOUR STRUCTURE RIGHT

Whether the property is held in your own name, through a partnership, company, trust, or even a Self-Managed Superannuation Fund, your RSM Accountant can assist you through the process of understanding the right structure for you with consideration to taxation, asset protection, and the ability to transfer ownership to the next generation.

In our experience, asset protection is a vital consideration for any significant investment, and the way you hold your property investments must consider this carefully – just as carefully as you consider your future taxation obligations.

Working in conjunction with your real estate agent and your finance broker, RSM can make sure that the way you buy your property works for you – it’s not the same for everybody.

2. BUY WELL

You need a great real estate agent, but maybe you should be considering the services of a property buyers’ agent too? A good buyers’ agent can really help you make good purchasing decisions.

You need to consider the future growth prospects of property values in the location you are looking to purchase. These can be impacted by location of the property to amenities, schools, and transport, plus any future infrastructure planned for the local area.

Everyone says you make your money when you buy your property – they’re right.

Discussing with your real estate agent, will help to guide you into purchasing the right property, and also provide guidance on anticipated selling prices (and saleability) in the future, as well as expected rental returns whilst you hold the property.

It’s important that you stay abreast of movements in property values, and rentability in your area.
 

3. GET TO KNOW YOUR COMPILANCE OBLIGATIONS

Your RSM Accountant can help you understand the Capital Gains Tax obligation on the sale of your property, as well as the annual income tax considerations from receiving rental income, and the allowable deductions you can claim.

Your compliance obligations may also include GST - if you are considered to be running a business.

Because compliance is vital, but also highly complex, it’s essential to seek guidance from your accountant and lawyer. 
 

4. KEEP GREAT RECORDS

There are several great software products that your RSM Accountant can help you with to track your rental income and expenses. You should consider a quality accounting software system to keep your records.

Good records make it easier to work out future Capital Gains Tax liabilities, GST obligations, and profitability of each property you hold. Being able to predict and plan your cash flows will help you make smart decisions as you go along.
 

5. PLAN YOUR CASH FLOWS AND FUNDING

Prepare a budget for every property you intend to purchase. These need to include:

  • Purchase costs of the property
  • Casts of setting up the right business structure for your investment
  • Predicted rental income (allowing for any rental vacancies)
  • Repairs & Maintenance requirements & other holding costs
  • Loan interest (and repayment) commitments
  • Expected selling proceeds
  • GST and income tax

Because compliance is vital, but also highly complex, it’s essential to seek guidance from your accountant and lawyer. 

ENGAGE RSM TO HELP

At RSM, our experienced accountants and business advisers can work closely with you to:

  • Help you buy the property in the right business structure for you
  • Understand your compliance obligations
  • Implement accounting software
  • Review property purchase and sale contracts for GST implications
  • Fulfil income tax, Capital Gains Tax, GST, and financial reporting obligations
  • Track and forecast cashflow
  • Manage bookkeeping activities

Because we have specialist expertise in the property and construction industry, we can help you avoid many of the common mistakes making our property investment journey easier.

For further information

To learn more about property investing, please contact your local RSM office.

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