Younger people are twice as likely to be unaware of common tax deductions as older generations.
Only 23 per cent of people under 35 know interest repayments are tax deductible compared with 44 percent of people aged 35 and over.
Pretty says this is especially surprising given Gen Y’s eagerness to get into the market, but suggested the high cost of housing could be putting people off investing as they feared a negative impact on their lifestyle.
State Custodians general manager Joanna Pretty says this is especially surprising given Gen Y’s eagerness to get into the market, but suggested the high cost of housing could be putting people off investing as they feared a negative impact on their lifestyle.
“They think it’s more expensive in terms of their normal living expenses than it actually is,” she says.
According to Property Tax Specialist principal adviser Shukri Barbara, expensive house prices have caused young people to become less engaged in researching investing. “Gen Y has been slow getting into the market because of rising prices over the past seven years, and as such their interest and attention hasn’t really been drawn to these sort of affairs.”
Pretty suggests understanding the tax system can help young people get a leg on the property ladder without having to make major lifestyle changes.
“That traditional plan of buying a place in the area you want to live in and staying there for 40 years is perhaps not as relevant any more. Rentvesting is actually a very good way for people to get ahead in these very expensive metro environments.”
By using their available savings as a deposit for an affordable investment property, young home buyers can grow their wealth faster than through saving alone, and eventually
The tax deductions all investors need to know about
The Australian Tax Office explains what expenses are deductible, but crunching the numbers based on a hypothetical property purchase can help put it into perspective.
According to the ATO, these are some of the expenses that may be deducted immediately:
- Interest expenses.
- Real estate agent fees and commission.
- Repairs and maintenance.
- Advertising for tenants.
- Body corporate fees and charges.
- Council rates and water charges.
- Land tax.
- Cleaning and pest control.
- Gardening and lawn mowing.
- Building, contents and public liability insurance.
- Some legal expenses.
Other expenses can still be claimed, but over a longer period of time:
- Borrowing expenses, such as loan establishment fees and lenders mortgage insurance.
- Depreciation of new assets, such as appliances, carpet and furniture.
- Capital works, including building costs, renovations or additions
Courtesy: Daniel Butkovich, Domain