Investment property tax and structure basics for Australian women

Investment property tax and ownership structure decisions are among the most consequential financial decisions Australian women make, and they're almost always accountant territory rather than broker territory. This post covers the basics so you know what to ask about, but every specific decision needs a licensed accountant or financial adviser to model against your situation. The main topics: how rental income is taxed, what expenses are deductible, how negative gearing and capital gains tax work, the difference between owning in personal name, joint names, a company, or a trust, and why single mums often benefit from simpler structures than the aggressive investor content suggests.

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This post is part of the Investing in property as an Australian woman guide. If you want the broader picture on investing, start there.

I want to be very clear at the start of this post: I'm a mortgage broker, not an accountant. The tax and structure decisions covered here need proper advice from a licensed accountant or financial adviser who understands your specific situation. This post is written to help you understand what topics to raise with them and what questions to ask, not to replace their advice.

That said, having a basic working knowledge of these topics before you sit down with an accountant makes those conversations significantly more useful. Here's the plain-language overview.

How is rental income taxed in Australia?

Rental income from an investment property is taxed as regular income. It's added to your other income (salary, business income, etc.) and taxed at your marginal tax rate.

If your investment property earns $25,000 in rent for the year, that $25,000 gets added to your other income for tax purposes. If you're in the 32.5 percent tax bracket, you'll pay approximately $8,125 in tax on the rental income (before deductions).

But it's rarely that simple, because most investment properties have significant deductible expenses.

What expenses can I deduct from rental income?

The main deductible expenses include:

• Interest on the investment property loan (the biggest one for most investors)
• Property management fees
• Council rates
• Water rates
• Insurance (landlord insurance is the standard)
• Body corporate fees (for units and townhouses)
• Repairs and maintenance (repairs to existing items; improvements are treated differently)
• Depreciation (of fixtures, fittings, and the building itself in some cases)
• Property inspection travel (limited rules apply)
• Accountant fees for preparing the rental schedule
• Advertising costs for finding tenants

These deductions reduce the taxable rental income. If the total deductions are higher than the rental income, the property is negatively geared and the loss can offset other income (like your salary).

The ATO has specific rules about what qualifies as a deduction versus a capital expense (which is treated differently). Your accountant will walk you through this in detail.

What is negative gearing?

Negative gearing is when your rental property costs more to hold each year than the rental income it produces. The shortfall is treated as a tax deduction against your other income.

Example:

• Rental income: $25,000
• Interest, expenses, depreciation: $35,000
• Loss: $10,000

That $10,000 loss can be deducted from your other income (salary, business income), reducing your total taxable income and therefore your tax bill.

The tax benefit depends on your marginal tax rate:

• At 32.5 percent tax rate: $10,000 loss saves $3,250 in tax
• At 37 percent tax rate: $10,000 loss saves $3,700 in tax
• At 45 percent tax rate: $10,000 loss saves $4,500 in tax

Negative gearing is more valuable to high-income earners because their marginal tax rate is higher. For lower-income earners, the tax benefit is smaller and the strategy is less compelling.

The other side of negative gearing is that you're relying on capital growth (the property increasing in value over time) to make the overall investment worthwhile. If the property doesn't grow in value, you're just losing money each year in exchange for a partial tax refund.

What about capital gains tax?

When you sell an investment property, any profit is generally subject to capital gains tax (CGT).

The basic calculation:

• Sale price minus purchase price minus buying and selling costs = capital gain
• If held for more than 12 months, individuals get a 50% discount on the gain
• The discounted gain is added to your income for the year of sale and taxed at your marginal rate

Example:

• Bought investment property for $500,000
• Sold 10 years later for $800,000
• Total costs (stamp duty, agent fees, legal fees): $50,000
• Capital gain: $800,000 - $500,000 - $50,000 = $250,000
• 50% discount (held over 12 months): $125,000 assessable gain
• Tax at marginal rate

There are strategies to manage CGT (timing the sale, offsetting with capital losses, super contributions in the year of sale), but they need to be planned in advance with an accountant.

What structures can I hold investment property in?

The main options:

1. Personal name (individual) Simplest and cheapest. Rental income and losses flow directly onto your tax return. You benefit from the 50 percent CGT discount. Suitable for most first-time investors.

2. Joint names Owned by two or more people (usually a couple or family members). Income and losses split according to ownership percentages. Each owner uses their own tax rate.

3. Company Investment property owned by a Pty Ltd company. Company tax rates apply (25 to 30 percent depending on size). No CGT discount for companies. More complex to set up and maintain. Rarely the right structure for owner-occupied or standard investment property.

4. Trust (family trust or unit trust) Property owned by a trustee on behalf of beneficiaries. Distributions can be spread among beneficiaries at different tax rates. More complex and expensive to set up and maintain. Can offer asset protection benefits.

5. Self-Managed Super Fund (SMSF) Property owned through your own super fund. Strict rules apply. Very complex. Requires specialist financial advice. Not appropriate for most investors.

For most Australian women starting out with investment property, personal name (or joint with a spouse) is the simplest and often most tax-effective option. The more complex structures usually only make sense for higher-net-worth investors with specific tax planning needs, or for asset protection reasons.

Why do single mums often benefit from simpler structures?

A few reasons:

• Lower income means marginal tax rates are lower, which reduces the benefit of complex tax structures
• Simplicity has real value when time is limited (single mums typically have less time for administration)
• Ongoing costs of complex structures (accounting fees, ASIC fees, trust deed maintenance) can eat into returns significantly
• Asset protection benefits of complex structures are often overstated for women in stable single-parent situations
• Family law implications can complicate trust structures, particularly if there's a possibility of future partnership

For most single mums, holding investment property in personal name is the right starting point. If circumstances change significantly (major income growth, business ownership with liability exposure, complex family situation), the structure conversation is worth revisiting with an accountant.

What questions should I ask my accountant?

Before you buy an investment property, ask your accountant:

• Given my income, marginal tax rate, and financial position, is investment property the right vehicle for me right now?
• If I go ahead, what structure should I use (personal name, joint, trust, other)?
• How should the loans be structured to maximise deductibility?
• What ongoing records do I need to keep?
• How will this affect my overall tax position over the next 5 to 10 years?
• If I want to sell in the future, how do we manage CGT?
• Are there any tax strategies I should be aware of before I commit?

A good accountant will spend time on this before you buy, not just at tax time each year. If your current accountant isn't interested in this level of pre-purchase planning, it's worth finding one who is.

Frequently asked questions

Do I need an accountant to invest in property?

Yes, effectively. You can technically manage a simple rental property tax return yourself, but you'll almost certainly miss deductions, structure the loans poorly, and pay significantly more tax than you need to. A good accountant costs a few hundred to a few thousand dollars a year and typically saves multiples of that in tax and missed deductions.

Can I claim depreciation on my investment property?

Yes, in most cases. Depreciation covers the wear-and-tear on fixtures, fittings, and (in some cases) the building itself. To claim depreciation properly, you'll usually need a depreciation schedule prepared by a quantity surveyor after purchase. The cost of the schedule is typically paid back within the first year through additional deductions.

What if my investment property is positively geared?

Positive gearing is when rental income exceeds all holding costs, producing income rather than a loss. The income is taxable (added to your other income). Positive gearing tends to occur with high-yield properties (often in regional areas) or older investments where the loan has been paid down significantly. Neither positive nor negative gearing is inherently better; both are strategies with different risk and return profiles.

Should I use a family trust to hold my investment property?

Sometimes, but usually not as a first-time investor. Family trusts have real benefits for some situations (income distribution flexibility, asset protection, estate planning) but come with real costs (setup, ongoing accounting, complexity). For most single women and single mums, personal-name ownership is simpler and more tax-effective. If you're considering a trust, talk to an accountant and a solicitor together, not just one.

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This article is general information only and does not constitute financial, legal or tax advice. Please speak to a licensed financial adviser, solicitor and your accountant about your specific circumstances.

Rielle Berglund is a mortgage broker and the founder of Matilda Tree Finance. She works with Australian women navigating major financial transitions, including separation, divorce, terminal illness and bereavement. She is also the creator of Runa, a free financial literacy app built for exactly this stage of life.

Book a confidential conversation with Rielle at matildatreefinance.com.au or start with Runa, free, at runaapp.com.au.

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You may also find these helpful

• Investing in property as an Australian woman: a clear starting point
• How borrowing capacity works for investment property in Australia
• Building your first investment property portfolio as a single mum

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Sources and references

This article draws on Rielle Berglund's professional experience as a mortgage broker. The following sources are relevant to topics covered:

• Australian Taxation Office on rental property income and deductions: ato.gov.au
• Australian Taxation Office on capital gains tax: ato.gov.au
• Australian Taxation Office on trusts: ato.gov.au