Tax efficient way to invest in property

1. Buying property

The things you need to consider when buying a property, buying and selling regularly, buying an investment apartment and buying with the firm intention of selling.

  • A. Why your reasons for buying a property are important

    • When working out whether or not you are required to pay tax on the profit from the sale of a property, your intention when you bought it is one of the important factors to consider.
    • It is common for people who buy property to think of themselves as a property investor, however this is not always the case.
    • Depending on your intentions, you may be an investor, a property speculator or a dealer for tax purposes. Each has very different tax considerations.
  • B. What if you are buying and selling regularly

    • It is important to consider how often you are buying and selling property as this can have a major effect on whether you have to pay tax on the profit from the sale of a property.
    • Any tax consequences are determined by taking a number of factors into consideration, including looking at whether or not there is a regular pattern of buying and selling property.
    • If you have a regular pattern of buying and selling property, you may be considered a dealer for tax purposes.
  • C. What if you buy with the firm intention of resale

    • When working out whether or not you are required to pay tax on the profit from the sale of a property, your intention when you bought it is one of the important factors to consider.
    • It is common for people who buy property to think of themselves as a property investor however this is not always the case.
    • If you have a firm intention to sell the property at the time you purchase it, then for tax purposes you are likely to be regarded as a property speculator or a dealer and you will have to pay tax on the later sale.
  • D. What if you buy an investment apartment that is zero rated for GST

    • If you buy an apartment with a zero rating it may seem like a good idea because you don’t have to pay GST on the purchase price as GST is charged at 0%.
    • There’s no hassle with tenants because the management company takes care of renting the apartment and you may also have a guaranteed source of income.
    • However, there may be unexpected GST to pay on the property if your circumstances change.