Get Your Head Around Australian Property Laws. And Avoid Majorly Screwing Things Up
Here’s a fun fact.
At the last count, there are over 14,000 pages of tax laws.
And if you printed them all out, double-sided, you’d have a stack 35cm high.
That’s about the height of a loaf of bread, if you stood it on its end.
The good news is you don’t need to know all 14,000 pages worth of rules.
All you need to know is what you have to watch out for.
And then you follow the golden rule.
“Who … Not How.”
The golden rule of ‘Who … Not How’ means you don’t need to know ‘how’ everything works.
You simply need to be aware of it.
And then know ‘who’ can help you.
Still, you need to know what’s important so you don’t get caught by surprise.
To help, here are the most important laws you need to know about.
Ownership Structure
You can own a house in your own name.
In fact, your house is probably in your own name.
But there are other structures you can use.
Owning an investment property in a trust for example, can give you more legal protection than if it’s in your own name.
And it also offers some attractive tax benefits.
However, you need to be careful because there are some things you can’t do in a trust which you can in your own name.
Another structure is a self-managed superannuation fund.
I wrote about this in more detail and you can read this by clicking here.
It might not seem important now, but when tax-time comes around or when you sell, you might regret not having found out more about these kind of structures.
The best people to help you here are a tax accountant or a lawyer.
Your Obligations As A Landlord
If you think owning an investment property means you can treat it just like your own home, think again.
Tenants have a lot of rights.
And so they should.
You might own the house, but it’s their home (if you get my drift).
You can’t just waltz on in any time you feel like it because your tenant has a right to privacy.
You’re also obliged to fix up any maintenance issues promptly, and get onto urgent repairs … urgently.
You see, when you rent out a house, you and your tenant enter into a pretty standard rental agreement (which varies from state to state).
It sets out the rights and obligations of both you and your tenant, along with the length of the tenancy and the rental paid.
And it’s there to protect both you and your tenant.
Most of the time, everything goes smoothly.
But they can get messy when things go off the rails.
Think bonds, rental increases, damage and terminating a lease.
And this is when you need the right ‘who’ on your side, to avoid it ending up in a tribunal.
Sometimes this can’t be avoided, no matter what you do.
What’s important here is you know what the law is, and you follow it rigidly.
The best people to get advice on the rights and obligations of you both are a property manager.
Use their services so everything goes smoothly, and to make sure everyone’s doing the right thing.
Property Taxes And Fees
Most of the time, your investment property will take care of itself.
The only time it grabs your attention is tax time, or when you sell it.
And the last thing you should do is … try and do it yourself.
There are a mind-boggling number of things you can claim as a tax expense.
For example, you can potentially claim the air-conditioning system as a deduction on your tax returns.
Plus up to hundreds of other items.
And if you try to go it alone here, you’ll miss most of them.
You could also get an unexpected ‘surprise’ from the state government as land tax.
Then when (or if) you sell, you’ll need to deal with capital gains taxes, and you’ll want ways to legally get these as low as possible.
That’s why tax planning is so vital.
There are plenty of ways you can minimise the tax you pay, and the sooner you plan out your next moves, the better.
The best people to help you here are a tax accountant and a property strategist.
Strata And Body Corporate Regulations
Buying a whole house is simple to manage.
Everything from the front fence to the back fence, and between the fences on either side is yours.
However, when you buy an apartment or a flat, you own everything behind the front door.
But the common areas?
All the owners, including you, are responsible for them.
How this works is a group of owners is formed called the Body Corporate (or the Owners Corporate or Strata).
Their job is to make joint decisions on behalf of all the owners to help manage the common areas like driveway, fences, yard, stairs and so on.
This doesn’t mean apartments are a bad investment.
It just means there’s another layer of management you need to be aware of, and you need to pay a fee each year to the Body Corporate which helps them maintain and upgrade the common areas.
The best people to help you here are a property manager.
New Regulations
The government don’t like making it easy for investors.
And with laws coming from both state and federal governments, it can be harder to keep up.
Some states, for example have laws around how often you can increase your rent.
And the laws around tenant rights differ as well, and are changing from time to time.
Things like eviction notice periods, rental bidding bans and pet-friendly lease requirements are always being reviewed and tinkered with.
Also in the cross-hairs are smoke alarms and electrical safety (which is good), plus energy efficiency.
There are also taxes to be paid in some states if you have a vacant property.
And of course the dreaded land tax varies from state to state as well.
The good news though is that a good property manager will keep you on the straight and narrow with rental laws.
A good tax accountant will keep you compliant with the various taxes.
And a good property strategist will also help you plan your future purchases so you minimise land tax.
Confusion To Profit
One reason a lot of people miss out on all the wealth they could make from real estate is … they get overwhelmed.
I mean, 14,000 pages of laws.
It all seems too much to deal with.
However, most of the time it’s pretty straightforward.
And when it’s not, all you need are the right people to guide you through.
We have access to the best in the business, and we have every base covered.
When you invest through us, we make sure everything is taken care of.
And we regularly review your progress with you to make sure you take advantage of all the opportunities to grow wealthier sooner, while not getting trapped by the various laws and taxes.
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Don’t take our word for it though.
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This way you can get a feel for what it takes to invest in real estate.
And how it can help you create more wealth and income.