Australia's property taxes top $52.5 billion p.a.
By Paul Bennion, Managing Director, DEPPRO
The 'hidden' cost of owning an investment property has been revealed by the latest ABS figures on Government taxation revenue which shows that Australian property owners are now paying collectively $52.5 billion in property taxes each year.
Unfortunately, many property investors do not factor in the cost of these property taxes when purchasing an investment property and how fast they have grown over the past decade.
Overall, total property tax collections in Australia have surged by nearly 70% over the past decade.
The biggest jumps in property tax collection have been in both New South Wales and Victoria.
In New South Wales, total property tax collections per annum have nearly doubled over the last decade from $9.3 billion to $18.2 billion while in Victoria they have also nearly doubled from $7.5 billion to $14.9 billion per annum.
There also has been significant increases in overall property tax collections in Queensland which now total $8.7 billion per annum as well as Western Australia with property owners now paying over $5 billion in property taxes each year.
These figures show be a wake-up call for property investors to ensure they focus on providing sufficient funds for property taxes.
For an average property in Perth, for example, property taxes for an average property can cost an investor more than $2,000 per annum.
The reality is that many investors buy a property investment for the first time tend to ignore these significant ongoing Government taxes associated with holding a rental property.
Generally, most of these property taxes are imposed mid-year to coincide with the start of a new financial year meaning that an investor could be confronted with Government taxes totalling thousands of dollars at this time of year.
These property taxes can have a major impact on the cash flow of property investors and make it financially more difficult retain their investment property especially if they have not properly budgeted for these taxes.
In addition, these property taxes are generally rising each year which means that property investors have to find additional funds to cover these costs if they want to hold their property investment long term.
These 'hidden' costs of owning an investment property highlight the need for investors to ensure that they claim their full tax benefits associated with owning an investment property including depreciation benefits.
Tax depreciation benefits can substantially boost the cash flow of property investors and can amount to up to 60% of the total purchase price of an investment property.
For example, the generous tax refunds that can be obtained through undertaking a professional tax depreciation report can amount to thousands of dollars each year and help to offset this annual Government taxes.
DEPPRO has currently a large range of clients who annually receive very large tax refunds each year through claiming their legitimate deprecation tax benefit and use these refunds to help pay Government property taxes.