Taxes and property

In general there are two reasons why governments levy taxes. The first and obvious reason is to generate income. Clearly, the government is very efficient at doing that! A second and less obvious reason however is to shape social policy. For instance the government may charge a disproportionately high tax on cigarettes and alcohol to discourage their consumption. Similarly the government generally gives tax breaks to property investors specifically to encourage them to invest in rental properties. If they did not provide tax breaks, fewer investors would invest in property, and the government would end up looking after more people in need.

An example of investment property related tax incentives would be that mortgage interest is tax deductible while it is not on your own home. Similarly you can claim depreciation write-offs on investment properties. More significantly, GST is not payable on rental income from a residential property.

Always seek professional advice when it comes to tax. The time and money spent will be repaid many times over in terms of tax saved or refunded.