Australians struggling with the high cost of living may have a simple solution that could significantly boost their finances: property investment. According to OpenCorp, a leading property investment group, Australians can potentially unlock up to $20,000 annually through tax deductions associated with investment properties.
For many Australians, the tax system offers hidden opportunities to reduce their taxable income. With strategic planning, property investors can take advantage of various deductions, such as depreciation and rental offsets. The result is a reduction in annual tax bills, which can make a significant difference in a household’s budget.
The Power of Tax Deductions in Property Investment
The concept of using property investment to reduce tax bills is not new, but it is one that many Australians overlook. Michael Beresford, executive director of OpenCorp, explained that while many Australians focus on mortgage repayments and household expenses, taxes are often their largest financial burden. According to Beresford, property investors can access tax-deductible expenses like depreciation on property assets, rental income offsets, and interest on loans for investment properties.
These tax breaks have the potential to reduce a household’s annual tax liability by up to $20,000. Over a long-term period, this can add up to substantial savings. Beresford highlighted that over the course of two to three decades, investors could save over $1 million by leveraging tax deductions from property investment.
Rentvesting: A Strategy for Younger Australians
In a market where first-home buyers are finding it increasingly difficult to afford a property, many younger Australians are turning to the concept of rentvesting. Rentvesting involves renting a property where one wishes to live while purchasing an investment property elsewhere, often in more affordable locations. This strategy allows individuals to access desirable lifestyles while building equity in property that may offer better financial returns.
Sarah Smelt, founder of Finance Society, observed that rentvesting is becoming increasingly popular, especially among younger buyers. She noted that this strategy enables Australians to invest in real estate without having to compromise on lifestyle. For many, it represents a practical entry point into the property market, allowing them to benefit from the capital gains and tax advantages associated with property ownership while still renting in the location of their choice.
Rentvesting is particularly beneficial for those who may be struggling with high property prices but still wish to take part in property investment. Smelt pointed out that about one in five of her clients are using this approach, with the number expected to grow as housing affordability continues to challenge younger generations.
