The heat of the Australian housing market in the last two years, I believe that many investors have tasted the benefits of early home purchases, but also let many hesitant people beat their breasts, repentance. People can always be heard talking about the house these days, by car or by dinner.
Not which district has risen much, or whose house has made how much money, it seems that everyone's focus has been on the value of the house. But today, I want to tell you about another role of investing in housing-tax deductions.
Australian Taxation System (Australian tax system)
The government that manages taxes in Australia is ATO.. Like most developed countries, the Australian government's most important source of income is tax revenue. Australia has a lot of taxes, the most important is personal income tax, corporate tax, transaction tax and so on. And what is the percentage of each tax category? Please look at the chart below.
Right! You're right! Personal income tax accounts for nearly half! Hard work you, now is a little upset ah, found that Australia's high welfare is dependent on you to support. It's okay, let's keep looking down. Everyone who works in Australia has an obligation to return taxes, and how much tax you have to pay each year is based on your current income. The chart below is Australia's tax rate.
Compared with most developed countries, Australia's tax rate is not low. Looking at this tax rate chart, you must think that the personal income tax, which accounts for almost half of total government income, is mainly provided by high-income people who have to pay a tax rate of up to 45%. But it's not what you think.
Net tax payable by company income size, 2009-10
The fact is that the income of $35,000 per 80000 people, in the personal income tax contribution is the largest, up to 38.6%! I can already imagine how unhappy you are now to read the article. It turns out that the park next to your home, the greening outside the office, and the fireworks you lined up to break into Lover Harbor in the New year, are all bought by your own money!
But there is a simple way to get you out of the 38.6%. That is another function of investing in housing-negative tax deductions.
Tax Deduction (tax deduction)
Tax Deduction is a way in the Australian tax system to allow individuals to reduce Taxable income. Basically, during a financial year, all expenditure related to revenue increases can be used as Tax Deduction. Invest your house as your investment project, and the expenses associated with it can naturally be used as Tax Deduction.
Your investment house interest expenses, management fees, water charges, council rate can be regarded as your expenses. That's why many high-income people, such as doctors, lawyers, certified public accountants, etc., raise the loan limit to 85% or even 95%.
In this case, because of the high loan line, the basic rent can not cover all the expenses. It seems that their investment house needs to be paid monthly, but in fact, all the money they put out can be used to deduct taxes and give them a large amount of money in tax. And then the house is adding value every year!
For the income of ordinary office workers, it may be difficult to reach more than 80% of the loan conditions. But don't worry, because the big part of the tax deduction on investment houses is here-depreciation. Depreciation simply means that you rent out a new and complete house, and your house will be "worn out" because of the tenant's use.
ATO allows you to count these "wear and tear" into your annual expenses. Depreciation rates range from 1.5% to 4%, depending on the circumstances of each property. That is, a eight hundred thousand house can be depreciated from 12000 to 30000 a year.
In other words, if your salary is 65,000 a year, a 800000 investment house can give you up to 30000 of the negative tax deduction, then your income is only 35,000, your personal income tax will be reduced by a large amount! The point is, you didn't actually lose any cash, just to make a depreciation report! And your house is still rising!
The chart below gives you a simple illustration of the tax impact of an undepreciated and depreciated home (about $ four hundred and fifty thousand).
If you don't invest in a house, the 75, 000-year-old needs to pay 15922 of your personal income tax, and an investment home worth about 450000 can save 5000 of the tax. According to the current average price, 1 million of the house in Sydney would save more tax! This is another charm of investing in housing.
