Save on Taxes When Buying Property in Australia
Maximise your savings with smart tax strategies when purchasing property in Australia.
Discover grants, deductions, and tips to reduce your costs legally.
How to Save Taxes when Buying, Refinancing and Investing property?
First Home Buyer Tax Benefits
If you’re purchasing your first property, you may qualify for multiple government incentives that reduce upfront costs and tax liabilities:
First Home Owner Grant (FHOG): A lump-sum grant (usually $10,000 or more) is available in most states for newly built or substantially renovated homes. It’s designed to help first-time buyers get into the property market faster.
Stamp Duty Exemptions or Concessions: Depending on your state, you may be eligible for full stamp duty exemption or a reduced rate. For example, in Victoria, no stamp duty is payable for first homes under $600,000.
First Home Super Saver Scheme (FHSSS): You can make voluntary contributions to your super fund (up to $15,000 per year and $50,000 total) and later withdraw it to use as a deposit. Because contributions are taxed at a lower rate than your salary, it helps you save faster and more tax-efficiently.
These benefits can save you thousands of dollars and make home ownership more achievable.
Investment Property Tax Deductions
If you’re buying a property for investment, the ATO allows you to claim various expenses that reduce your taxable income:
Interest on Home Loan: The interest paid on your investment property loan is fully deductible.
Property Management Fees: The cost of hiring a property manager or agency can be claimed as an annual expense.
Depreciation: Claimable for both the building structure and eligible fixtures (appliances, carpets, blinds, etc.), especially valuable in new or renovated homes.
Repairs & Maintenance: Expenses related to fixing wear and tear (not improvements) can be deducted immediately.
Other Costs: Council rates, strata fees, insurance premiums, travel (under limited circumstances), and legal/accounting fees are also deductible.
These deductions can help improve your cash flow, lower your tax bill, and improve overall return on investment.
Tax Strategies When Refinancing
While refinancing doesn’t directly reduce tax, it can help indirectly:
Debt Consolidation: Refinancing to roll multiple debts (e.g. personal loans or credit cards) into one mortgage can lower interest payments and improve cash flow.
Investment Loan Structuring: Refinancing your loan into a separate investment loan may allow you to claim more tax deductions.
Splitting Loans: Allows you to separate deductible (investment) debt from non-deductible (personal) debt.
GST and Property
For most residential home buyers, GST doesn’t apply, and your property transaction is exempt. However, there are exceptions:
GST applies if you’re buying a new residential property directly from a developer or if you’re involved in property development or flipping as a business.
If you’re registered for GST (as a developer or company), you may be able to claim GST credits, but also need to remit GST on the sale.
This area can be complex, so if you’re unsure whether GST applies to your situation, it’s essential to seek advice from a qualified accountant or tax advisor.
Buying Property? Let’s Discuss Smart Tax Planning.
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Negative Gearing
Negative gearing is a strategy where the rental income doesn’t cover your property’s ongoing expenses, resulting in a loss. That loss can be used to reduce your taxable income, which in turn lowers your overall tax payable.
For example, if your property generates $20,000 in rental income but costs $30,000 in expenses (including interest), the $10,000 difference can be claimed against your salary or business income. This can result in a significant tax refund each year.
It’s especially effective when combined with long-term capital growth, as it lets you hold the property affordably while it appreciates in value.
Capital Gains Tax (CGT) Discount
When you sell an investment property for a profit, you’re required to pay Capital Gains Tax on that gain. However, if you’ve held the property for more than 12 months, you qualify for a 50% CGT discount.
Here’s how it works:
You buy a property for $500,000 and sell it after two years for $650,000.
Your capital gain is $150,000.
With the CGT discount, only $75,000 is added to your taxable income.
This discount significantly reduces your long-term tax exposure and makes buy-and-hold investing more attractive.
PAYG Withholding Variation
Most people wait until the end of the financial year to get a tax refund on property deductions. However, if you’re expecting large deductions (e.g., through negative gearing), you can apply for a PAYG withholding variation.
This allows you to receive your tax savings throughout the year, by reducing the amount of tax your employer withholds from your salary. That means more take-home pay each month — helping with cash flow and loan repayments.
Speak with accountant to submit a variation form through the ATO.
Depreciation Schedules
Property depreciation is one of the most overlooked tax benefits, especially for newer properties. A depreciation schedule — created by a qualified quantity surveyor — breaks down how much value your building and its assets lose over time, and how much you can claim back at tax time.
There are two key types of depreciation:
Capital Works (Division 43): Applies to the building structure, like walls, floors, and roofs. Usually claimable over 40 years.
Plant and Equipment (Division 40): Includes removable assets such as ovens, blinds, carpets, etc.
With a professional schedule, you could claim thousands of dollars annually, especially in the first 5–10 years of ownership.
Offset Accounts
An offset account is a transaction account linked to your home loan. The money in this account “offsets” your loan balance, reducing the interest charged. For example:
You have a $400,000 loan and $50,000 in your offset.
You only pay interest on $350,000.
While it’s not a tax deduction, reducing your interest payments helps you save money and repay your loan faster, indirectly supporting your broader financial and tax goals. It’s also a great place to hold surplus cash like rental income or savings.
Frequently Asked Questions
What does a mortgage broker do?
A mortgage broker helps you find the right home loan. We will compare loans from many different lenders, explain confusing terms, and handle the paperwork for you. Best of all, their service is free because they get paid by the lenders, not you.
How much deposit do I need?
Most banks prefer a 20% deposit to avoid extra costs like Lenders Mortgage Insurance (LMI). But if you don’t have that much, you might still buy with as little as 5% using government schemes like the First Home Guarantee or with help from a family guarantor.
How much can I borrow?
The bank looks at your income, expenses, and debts to decide how much you can afford. A mortgage broker can give you a realistic estimate before you start house hunting.
Should I choose a fixed or variable rate?
A fixed-rate loan keeps your repayments the same for a set time (1–5 years), which is good for budgeting. A variable rate can go up or down but often has more flexibility, like extra repayments. A broker can help you decide which suits you best.
What other costs are there besides the loan?
Buying a home comes with extra costs like stamp duty (a government tax), legal fees, and building inspections. Some states waive stamp duty for first-home buyers, so ask your broker.