Property Investment Tips: Renovations and tax

By the resi financial blog team, 28 May 2014

Will I get taxed on my renovation

When you utilise the best fixed home loan rates in order to invest, you could certainly build your wealth, but you need the right strategy.

For instance, you'll need to consider where to buy, when to buy and what kind of tenants you could be leasing your property to. Many investors will choose to renovate their newly-acquired dwellings in order to maximise their rental yields and add value to the properties.

Aside from these factors, there's another element to the investment game that you can't forget when renovating: taxes. 

What kind of renovator are you?

The Australian Taxation Office (ATO) explains that if you renovate at least one property, you need to establish whether you're a personal property investor, are in the business of renovating properties, have entered into a profit-making activity or have undertaken renovations that are substantial.

It's important to do so, as the answer affects your tax entitlements and obligations. 

Renovating for profit

If you obtain a property with the goal of renovating it then selling it for profit, or approach this process in a "business-like way", you're probably completing a profit-making activity, explains the ATO.

There's no clear answer to this question, as there are a number of factors that could affect whether you're renovating for profit, including the organisation, planning, size and reliance on the income received to meet your own expenses or that of your dependants.

You may be required to register for GST if you complete property transactions in a certain way, so it pays to be aware of the rules.

However, with the endless renovation possibilities open to you and some of the best variable and fixed home loan rates available, an investment property renovation could be worth it.

Categories: Property Investment