Tax-effective investment ideas for property investors - NAB
What tax-effective investing means
These are ways of investing that may help reduce the tax you pay, depending on your goals and circumstances.
Common examples include:
- Super, which may offer tax benefits for long-term investing.
- Franked investments, which may reduce the tax you pay on dividend income.
- Investment property, where tax can shape the overall return.
If you’re investing in property, it helps to look beyond tax and consider how the investment fits your broader plans.
Why tax matters when you invest
When people compare investments, they often focus on the return. But what matters just as much is what you may keep after costs and tax.
Different investments can be taxed in different ways. That means tax can affect the overall value you get from an investment over time.
Still, a tax benefit on its own does not make an investment right for you. Tax may improve the outcome, but it shouldn’t be the only reason you invest.
Common tax-effective investment approaches
There’s no single approach that suits everyone. Here are some popular options.
Property investment
Property investment can come with tax considerations that may affect your overall return.
Depending on the property and how it’s used, some expenses may be deductible. Capital gains tax (CGT) may also come into play when you sell.
For some investors, that can make property worth exploring as part of a broader investment strategy. But as with any investment, the right approach will depend on your goals, your timeframe and your circumstances.
Superannuation
For many Australians, super can be one of the most tax-effective ways to invest over the long term.
Depending on the type of contribution and your situation, super may offer tax benefits compared with investing outside super. That can make it a useful option if your focus is building wealth for later in life.
Super is generally designed for retirement, so it may not suit goals that need short-term access to your money. If you’re thinking about adding extra money to super, it’s worth making sure the approach fits your wider plans.
Franked investments
Some Australian shares may pay franked dividends. These dividends can come with franking credits, which may reduce the tax you pay, depending on your situation.
That may make them appealing to some investors, especially those looking for income. But it still helps to think about things like diversification, risk and whether the investment suits your goals.
For property investors, the bigger picture matters
Tax can affect your return, but it’s only one part of owning an investment property.
Can you manage the costs month to month?
One of the biggest questions is whether the property is affordable to hold over time.
A tax deduction may help at tax time, but it doesn’t remove the cost itself. If the property costs more to own than it brings in, you still need to cover that gap from your own money. That’s why it helps to look closely at your cash flow before relying on any tax benefits.
Have you factored in buying, owning and selling costs?
The cost of a property does not stop at the purchase price.
There may be loan interest, rates, insurance, repairs and other ongoing costs to budget for. There can also be buying and selling costs, such as stamp duty and agent fees. Looking at the full picture early can help you make a more informed decision.
Do you understand what records you may need?
Good record keeping can make tax time easier and help you understand how your investment is performing.
That includes keeping track of what you spent, when you spent it and what the cost was for. It can also help you work out which costs relate to owning the property, improving it or preparing it for rent. If you’re not clear on how a cost may be treated, it’s worth checking before you rely on it in your planning.
Check the latest tax information
Tax rules can change over time. Government announcements can also change before they become law. If you’re researching property investment, it’s a good idea to check official sources for the latest rules and any proposed changes before making decisions.
You can also explore our guides about negative gearing and capital gains tax that can help you get the bigger picture about property tax.
Talk to a professional adviser
Not every tax-effective strategy will suit every investor.
What works for one person may not suit someone else’s goals, budget or tax situation. If you’d like to talk through your broader banking or lending plans, we can help point you in the right direction.
Get financial advice
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The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial and taxation advice before acting on any information in this article.
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