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CPA PRACTICE
Property Investor Guide

The $20,000-Per-Year Question Every Property Investor Should Ask

Discover why paying off your investment loan faster might be costing you thousands — and what smart investors do instead.

Tax-Smart Strategies
Real Number Examples
Latest ATO Updates
Impact Taxation And Financial Services Pty. Ltd. is a CPA Practice.
Liability limited by a scheme approved under Professional Standards Legislation.
General information only. Tax outcomes depend on individual circumstances, eligibility, and current tax law.

The Common Mistake

Many property investors focus on one goal only: paying down debt as fast as possible. But from a cash flow and tax point of view, that’s not always the best approach.

It’s natural to want to eliminate debt. We’ve been taught that debt is bad and that paying it off quickly is always the smart move. However, when it comes to investment property debt, this conventional wisdom can actually cost you tens of thousands of dollars over time.

The key insight that separates experienced investors from beginners is understanding the difference between “good debt” and “bad debt” — and knowing how to make your debt work for you rather than against you.

Let’s Look at a Simple Example

Assume you borrow $1,000,000 at an interest rate of 5.5%. Your annual interest cost is $55,000.

Instead of using surplus cash to reduce the loan, you invest that money into an income-producing investment earning 7.5%. That investment generates $75,000 per year.

Before Tax Calculation

Investment Return (7.5%) $75,000
Interest Cost (5.5%) – $55,000
Net Benefit Per Year $20,000

This simple calculation shows a $20,000 annual advantage. But the real power of this strategy becomes apparent when you add the tax angle.

The Tax Advantage

Because the loan is used for investment purposes, the interest is generally tax-deductible. This means the real cost of the loan is lower after tax.

Key Tax Insight

For investors on a 47% marginal tax rate, a $55,000 interest deduction could reduce your tax by around $25,850. That means your after-tax interest cost is closer to $29,150, not $55,000.

Meanwhile, the investment income may be:

  • Taxed at a lower effective rate
  • Partly tax-deferred
  • Offset by other deductions

After Tax Calculation (47% Tax Bracket)

Gross Interest Cost $55,000
Tax Deduction Benefit (47%) – $25,850
Actual After-Tax Cost $29,150

When you compare the after-tax cost of borrowing ($29,150) against your investment returns, the advantage becomes even more significant. This is the power of strategic debt management.

“Is my debt working for me?”

The smarter question is not “How fast can I repay my loan?”

What This Means for Investors

With the right structure, you may be able to leverage multiple advantages simultaneously. Here’s what experienced investors focus on:

Using the Bank’s Money

Leverage allows you to control more assets with less of your own capital.

Keeping Interest Deductible

Maintain the tax-deductible status of your investment loan interest.

Improving Cash Flow

Better manage your monthly cash position while building wealth.

Growing Wealth Faster

Compound growth on a larger asset base accelerates wealth creation.

This is why many experienced investors don’t rush to pay off “good debt.” Instead, they focus on whether their money is earning more than the after-tax cost of borrowing.

Important Consideration

Every investor’s situation is different. The right strategy depends on your income level, risk tolerance, investment goals, and overall financial position. Professional advice is essential to ensure this approach is suitable for your circumstances.

Latest Property Tax Updates

Staying informed is the first step toward keeping more of what you earn. Here are the latest developments every property investor should know about.

ATO Alert Holiday Home Deductions Under Scrutiny

New Apportionment Rules for Mixed-Use Properties

The ATO has issued draft taxation ruling (TR 2025/D1) outlining that losses and outgoings on properties used for both personal and rental purposes will need to be apportioned on a “fair and reasonable” basis.

SMSF Travel Deductions for Property Inspections

Forget About Claiming Christmas Travel

From 2018, the government denied all travel deductions relating to inspecting, maintaining, or collecting rent for a residential investment property. However, expenses incurred to engage third parties remain deductible.

Market 2026 Rental Market Outlook

The Hidden Rental Time Bomb

Unit rents are climbing sharply again across almost every capital city, vacancy rates are still hovering at crisis levels, and supply is falling further behind.

RBA Interest Rate Outlook

Further Rate Cuts “Not Needed”

RBA Governor Michele Bullock has indicated that another rate cut would be unlikely if underlying economics remain the same.

Take the Next Step

The strategies outlined in this guide represent just a fraction of the tax planning opportunities available to property investors. Every situation is unique, and the right approach depends on your specific circumstances, goals, and risk profile.

At Impact Taxation & Financial Services, we specialize in helping property investors like you navigate the complex world of tax planning. Our team has years of industry experience as Financial Controllers and Senior Financial Managers, and we’re committed to helping you maximize and protect your wealth.

Ready to Discuss Your Strategy?

We provide free 30-minute consultations for all new clients to show you how to maximize and protect your wealth, where you can save money and how.

Book Your Free Consultation

Or call us directly:

1300 TAXSAV (1300 829 728)

[email protected]

3/80 Kitchener Parade, Bankstown, NSW 2200

Impact Taxation And Financial Services Pty. Ltd. is a CPA Practice.

Liability limited by a scheme approved under Professional Standards Legislation.

© 2026 Impact Taxation & Financial Services. All rights reserved.

General information only. Tax outcomes depend on individual circumstances, eligibility, and current tax law. This document does not constitute financial, tax, or legal advice. Please consult with a qualified professional before making any financial decisions.

10 things you should consider before buying a property

Are you considering buying a property? Do you know you could miss opportunities to save thousands, or tens of thousands of dollars if you don’t plan well before the purchase?

Below are a few key considerations:

1. How should you set up your loan structure? If you don’t have a loan offset account for a rental property, after you make extra payments directly to the loan account, you can only claim interest deduction on the remaining balance of the loan. For tax purposes, this deductible balance can’t be changed even if you redraw the overpaid amount later. A good loan structure could also help you to stabilize interest rate and speed up loan repayment by combining a standard variable loan (with an offset account) and a fix rates account.

2. Timing of renovation. You might want to do a renovation right after you have bought the rental property. But do you know for any genuine repair & maintenance included in the renovation, you can claim an outright deduction against the rental income when the property is available for rental? If the work is done before the date when the property is available for rental, you can only claim the deduction against future capital gain when the property is sold. Depend on when you are going to sell, it could take years or up to decades before you can claim the deduction.

3. How should you split ownership? You might want to share the property ownership with a family member. For tax purposes, the percentage of ownership is based on the legal title, regardless of who is paying more on the mortgage. If the property will give you a tax profit, you might want to allocate more
ownership to the low-income earner to utilize the lower marginal tax rate. If it is giving you a tax loss, you might want to allocate more ownership to the high-income earner to utilize the loss. The goal is for the family to pay minimum tax together.

4. Should you use a family trust to purchase the property? There are many pros and cons related to a family trust. The advantages include tax savings on rental profit or capital gain, asset protection and succession planning on family wealth. However, family trust can’t distribute losses. All losses are trapped in the trust to be used to offset future trust profit. Therefore, you can’t utilize any rental loss in a trust to offset other income such as salary & wages. Family trusts also attract high accounting fees on initial setup and annual fees on financial statements and tax returns. State governments also charge much higher land tax on family trusts.

5. Will the income level change in future years for different owners? You might want to forecast the possible income for different owners to understand total tax payment / savings related to the property. This could also impact on your decision making on point 3 and 4 above.

6. Understand when you can treat your property as main residence to receive an exemption on capital gains tax. When eligible, even if you have received rental income, you could still treat your rental property as main residence and receive the exemption. To be eligible, you will need to treat it as your main residence at the beginning. Please check out this ATO link: Treating former home as main residence.

7. Decide whether you need to purchase a depreciation report. Most taxpayers don’t know that the depreciation on the building will need to be added back to calculate capital gains tax when the property is sold. When the property is held for more than 12 months, after applying the capital gains tax discount of 50%, it will effectively cut the tax rate by half at the time of sales. This makes depreciation deductions desirable for high income earners. However, for low-income earners it might not be ideal to claim depreciation as a rental deduction since they could be paying more on capital gains tax in the future. It could get more complicated if the property is under joint ownership between high and low income earners.

8. You might want to consider Centrelink payments for future or existing owners. Most Centrelink payments are income and asset tested. Before attaching a rental property to a family member who is receiving, or plan to receive government benefits, you might want to check the testing thresholds first to see if the Centrelink payment will be impacted. This is also applicable when you are making distributions from a family trust to different family members.

9. Have you considered using your SMSF (selfmanaged super fund) to make the purchase of a rental property? There are a lot of tax saving opportunities with a SMSF since the income tax rate is only 15%. And the capital gains tax rate is effectively only 10% after factoring in the 1/3 discount. The major downside with a SMSF is normally you can’t get the money out until you retire or on compassionate grounds (SMSF does have more flexibilities compared to normal retail super fund. But the choices are still very limited). It could be expensive to set up and operate a SMSF too. There are also strict legal requirements on the trustees. Penalties on incompliance could be severe. Tax law around SMSF is very complicated too. You will need to find a good tax accountant specialized in SMSF to help you to understand the structure, also do a cost-benefit analysis before setting it up.

10. Consider internal ownership changes. For your existing rental properties, you can also consider whether you should transfer the ownership between family members, or between different business structures (this is not applicable for SMSF). You might want to do this when the income level changes with family members, or rental property changes between tax profit and loss. Before the change, you need to consider the cost of transfer including capital gains tax, stamp duty, conveyancer fees, etc. Again, a cost-benefit analysis is a must before the change.

Last but not the least, did you combine all the above strategies and compare your choices? If you haven’t yet, how would you know that you have picked the best strategy to minimize your taxes? We can help you to factor in all considerations, compare different scenarios, also present you with a Property Prepurchase Report with all our findings to help you to make a decision. Contact us today to book in a consultation with an experienced tax accountant!

IMPORTANT INFORMATION
This is general advice only and does not consider your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from your financial adviser and seek tax advice from your accountant.

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