Australian Property Investors: How to Pay No Tax (Legally) [AusPropertyStrategy099]
Still leaving your cash in a term deposit at 3.8%? While your money sits, Property prices in Brisbane and Perth have been climbing 10–20% a year. Today I’m revealing two ultimate money-making secrets in Australian real estate. The first—99% of people know. The second can rocket your wealth straight to the moon. Here’s the shocker: there’s a policy that can make the Australian Taxation Office (ATO) not only skip your tax, but send you a refund. And the higher your income, the more it saves you. By the end of this video, you’ll understand why wealthy Australians hold multiple properties, how they can legally pay almost no tax—and even get money back. I’ll also share a final, little-known tax hack—one even many accountants miss—that lets you stop worrying about capital gains tax. The real engine of property wealth is built from layer upon layer of tax strategy.
Two Ways to Make Money
In Australia, there are only two reasons to buy a residential investment property: two ways it makes money. First, rent. If you find a tenant to live in it, you collect rent. After you subtract holding costs, if there’s a surplus, it’s a positively geared property; if there’s a shortfall, it’s negatively geared. In residential property investing, cash flow is usually the smaller piece. Its job isn’t to make you rich—it helps you hold the asset long enough to capture the bigger prize: capital gain.
The goal is for price growth to beat bank interest. Savings rates are typically 2–5%; right now a 12-month term deposit is about 3.8%. House prices? Detached homes average around 7% per year long-term, and since the pandemic, Brisbane and Perth have been rising 10–20% a year. That gap is huge. Add 80% lending—roughly 4× leverage—and compounding over time. After 10 years, the difference can feel like a rocket to the moon.
Also note: rent and capital gain are taxed separately. Cash flow and its income tax are assessed each year while you hold; the buy-sell difference is used to calculate capital gains tax when you sell.
Rental Income and Deductions
Even if you’re buying mainly for capital growth, you’ll likely rent it out. Rent is taxable income. If you hold the property in your personal name, the rent is added to your personal assessable income each year.
For example: your salary is A$80,000, and rent received is A$40,000. For tax, your total income is A$120,000. Under the FY25–26 personal tax rates, that rental portion faces about 30% tax; with a higher salary, you could land in the 45% bracket.
Sounds heavy—until you remember investment properties come with many deductible costs. The biggest is interest on the loan. Most holding expenses are deductible: interest, repairs and maintenance, council rates, strata, water connection charges, insurance, property management fees, advertising, land tax, and more. Then there’s the key deduction: depreciation—on appliances, fit-outs, the building structure, and any extensions or renovations. If the building’s useful life is 20 years, its book value falls each year. That drop is depreciation, counted as a holding cost and therefore deductible.
If total holding costs exceed rental income, something powerful happens—negative gearing. The loss is deducted from your personal income before tax. Back to our example: salary A$80k, rent A$40k, holding costs A$50k. The property loses A$10k, so your taxable income falls to A$70k. That A$10k reduction saves about A$3,000 in personal income tax at a 30% rate. Most holding costs are real cash outflows; only depreciation is a non-cash expense. It doesn’t hurt cash flow but still lowers your tax. Now you see why many high earners prefer new builds and maximise depreciation—new homes depreciate more, so the tax offset is larger. Older homes have little, sometimes no, depreciation left. I know all buyers' agents say new properties are bad, but for me, it's just marketing nonsense because they can only deal with existing properties. My business covers new and old properties anywhere in Australia, so I don't have to say a city is better than the other or a type of property is better. Whatever suits my members, I'll just recommend that.
Some people suggest abolishing negative gearing—but the Australian government has rejected that idea. (See APS096 for details.) One more caveat: negative gearing only applies to properties held in personal names. If the owner is a company, family trust, or self-managed super fund, negative gearing isn’t available. I prepared a detailed PDF file highlighting the tax implications for holding properties under different entities. Download link in the video description below.
The CGT Playbook
The second tax is Capital Gains Tax (CGT). The rule is simple: sell at a profit, you pay tax; sell at a loss, you can offset it. Calculation is simple too: sale price minus cost base. The profit is added to your personal income for that year. Hold an investment for over 12 months and you get a 50% CGT discount. If that sounds abstract, here’s an example.
One of our VISION members bought a Perth house in 2023 for A$600,000. By early 2024 it was valued at A$800,000—about A$200,000 higher in roughly a year. If they sold, how much CGT would they owe? Let’s rebuild the numbers.
Purchase costs = A$41,200
Stamp duty A$22,500
Solicitor A$2,200
Buyer’s agent A$16,500
Selling costs = A$19,800
Agent + advertising A$17,600
Solicitor A$2,200
CGT mechanics
We first determine the cost base, then the actual capital gain and tax.
Purchase price: A$600,000
Purchase costs: A$41,200
Selling costs: A$19,800
Division 40 depreciation (plant & equipment) = A$3,000
Think carpets, air-con, flooring—items separable from the building. These are stand-alone assets, so they don’t reduce the cost base. The Division 40 you claimed during ownership already reduced your income tax; you don’t “pay it back” on sale—an advantage. Since 2017, only brand-new plant & equipment is claimable: brand-new homes qualify, and items you install after purchase qualify.
Division 43 depreciation (building write-off) = A$10,000.
This is the building itself and must be subtracted from the cost base, which increases the taxable capital gain. You claimed this during ownership to cut the personal income tax; on sale, the lower cost base “claws it back.” Net effect: you enjoyed an interest-free loan from the ATO while you hold the property—one reason we advocate buy, hold, don’t sell. These two depreciation streams are why many high earners prefer house and land packages.
Cost base = A$651,000.
Assume no carried-forward capital losses and the property was held for over 12 months, so you get the 50% discount.
Taxable capital gain = (800,000 − 651,000) × 50% = A$74,500.
If your personal income tax marginal rate is 37%, CGT = A$27,565.
So from a A$200,000 “paper gain,” what do you actually pocket after costs and CGT?
A$200,000 − purchase costs − selling costs − CGT = A$111,435, a bit over half.
If you have any questions about property investment, please book a free 15-minute discovery call on our website. If you want a team offering one-stop service to help you build a property investment portfolio, achieve financial freedom and retire early, join our VISION Membership by booking a 30-minute obligation-free discovery session to start with. Or to keep it simple, our data-driven buyer's agency service can help. We buy and manage properties for our clients anywhere in Australia. Links to the service are in the description below.
Mixed Use: Home + Investment
If a property has always been your Principal Place of Residence (PPOR), there’s no CGT when you sell. If you lived in it first and then rented it out, get a valuation at the start of the rental. When you sell, you only pay CGT on the gain during the rental period, and you can still use the 50% CGT discount.
For example: you buy a home, live there for 2 years, then move out and rent it. As long as the rental period is under 6 years and you move back in within those 6 years, that property in the rental period is still treated as your PPOR, so no CGT on the gain for that period. This is the six-year rule. You can use it repeatedly: rent for 5 years, move back and live there for 1 year, rent for 5 years, and so on—keeping the PPOR status and avoiding CGT. But if any one rental period exceeds 6 years, that block is treated as an investment period and the gain for that block is assessable for CGT (with the 50% discount). Outside those 6-year blocks, the time you live there still counts as living in your PPOR.
Our usual advice: After you buy a home, don’t rent it out immediately. Move in first, then rent later; get a valuation when leasing begins; every ~5 years move back for ~1 year, then rent again. That way, the property in the whole holding period will qualify as a PPOR and there is no CGT on sale. I’ve seen clients pay tens or even hundreds of thousands extra by misunderstanding these rules. Speak to an accountant before selling—the savings can be enormous. If you want to learn by yourself, check the ATO guidance pages.
The Ultimate Tax Secret: Never Sell
So what’s the property investor’s secret to paying less tax?
1.Choose the right ownership entity. Personal ownership is taxed at personal income tax rates. Companies, trusts and SMSFs follow their own rules. In an SMSF’s accumulation phase, rental income is taxed at 15%, CGT at 10% (if held for more than 12 months). In the pension phase, both can be 0%. I made a detailed video on entity choice: [APS076].
2.Invest inter-state. 1. To use the land tax threshold in each state as it is calculated separately. It will lower your holding costs. 2. to invest in different property cycles, and balance your investment portfolio.
3.Maximise negative gearing. Especially powerful for high-income individuals—cut personal tax, keep more cash, reinvest faster.
4.Exploit CGT concessions and the six-year rule. Purely from a tax angle: if you hold an investment property in your personal name, prioritise high-growth assets with balanced or slightly negative cash flow (you can use the CGT discount). In a company, we prefer cash flow, as company tax rates are often lower than the marginal personal income tax rates. In a trust—less sensitive, you can distribute income to beneficiaries to lower the combined tax rate. In a super—also less sensitive; it already has the lowest tax rates.
5.Time your sale. Ideally, when you have capital losses to offset, or when your super has room for contributions. The former offsets the gains; the latter lets you channel gains into a newly set-up SMSF at around 15% tax rate, and you can use the SMSF to buy another property in the same year.
6.The endgame: never sell. No sale, no CGT bill. “But how do you get cash to live or buy more?”—finance. As equity grows, top-up or refinance with another bank to release equity in cash. For example: buy at A$600k with 80% LVR (A$480k loan). Years later it’s worth A$800k; refinance to 80% of A$800k = A$640k. Pay off the old A$480k loan, that will leave you A$160k cash—free to spend or use as the next deposit, with no tax triggered. Many people repeat buy → refinance → buy, and in a few years build a multiple properties portfolio and step up the wealth ladder.
Tax Record-Keeping
If you’ve grasped the basics above, you’re already ahead of 90% of investors. If you self-manage your portfolio, review how your accountant works first. There are two kinds of them:
1.Clerical accountants: they just lodge what you give them—no proactive tax ideas.
2.Advisory accountants: they design strategies to maximise deductions. Fees may be higher, but tax savings are larger. If yours is Type 1, replace them immediately with Type 2.
Then your job is to keep every receipt—loan statements, legal fees, borrowing costs, bank charges, council rates, water, etc. Store paper and digital copies. Claim lawful deductions; avoid anything improper. Our VISION members are matched with specialist property accountants who handle the tax work very well.
Are these generous tax breaks for property investors “fair” when they got so much wealth without working? I don’t know. But these are the rules of the game. If a legal advantage sits in plain sight, why not use it? I know many Australians save for years just to afford a deposit. In today’s environment, housing isn’t treated as a basic right—it’s the fault line between classes. Don’t blame investors; blame the system. Investors simply learned how the game is played. If you have A$100,000 saved, AusPropertyStrategy can help you board the property-wealth train. Come talk to us.
Watch the video version of the blog on YouTube.
15 Minutes Free Consultation (Limited-Time Free Offer)
If you have any questions about Australian real estate, we invite you to use our 15 Minutes Free Consultation service. Once you have filled in the form, a professional property investment strategist will be in touch with you. They will assess your needs and provide fundamental advice. This service is designed to help answer general property-related queries. BOOK NOW.
VISION Membership
Our Flagship Service: VISION Membership. Your One-Stop Property Investment Manager – Build a Tailored Portfolio and Achieve Financial Freedom
Whether you're an employee, a professional, a business owner or even a new migrant, everyone has a financial goal for the future. The VISION Membership is designed to solve all the pain points in your Australian property investment journey through one single, comprehensive service.
By analysing your current financial situation and long-term goals, we'll tailor a property investment plan just for you. Our team will match you with the ideal mortgage structure, tax strategies, wealth planning, and legal support, empowering you to go further, faster, and smarter on your path to financial freedom.
VISION Membership is perfect for busy individuals who want a professional team to create, expand and manage their Australian investment portfolio. If you're looking for a dedicated team, including real estate investment experts, mortgage brokers, accountants, financial planners, and property solicitors, VISION Membership is your ideal solution.
Start with an obligation-free 30-minute discovery session on Zoom. BOOK NOW.
VISION Buyer’s Agent
No time for inspections? Tired of dealing with pushy selling agents? Unsure how much to offer or feeling nervous about auctions? Worried about buying the wrong property? If any of these sound like you, AusPropertyStrategy's Australia-wide VISION Buyer's Agent Service is here to help.
We provide end-to-end support to help you build an optimised property portfolio and achieve your financial goals—whether you're investing interstate, refinancing, or planning post-settlement leasing or resale. Our services cover everything from suburb research and property selection, to price negotiation, auction bidding, and post-settlement support.
Start with an obligation-free 30-minute discovery session on Zoom. BOOK NOW.
real estate australia,real estate investing,australian property,australian housing market,australian economy,australian property investment,australian property market,buying property,australian real estate,mortgage brokers brisbane,first home buyer,Australian Real Estate,Australian Real Estate Investment,Australian Property Investment,Real Estate Investment,Property Investment,Property Investment Australia,Passive Income,Positive Cash Flow,Australia Real Estate Investing,Australian Real Estate Investors,Australian Property Investors,Vision Wealth Mentors,Vision Real Estate Investors Australia,financial freedom, freedom through property investment,real estate investors,property investment,passive income,positive cash flow,real estate course,real estate courses,real estate training,australian property market,property investment brisbane,property investment sydney,melbourne property market,investing in brisbane,investing in melbourne,how to invest in property,buying properties,start investing in property,property investment strategy,how to buy investment property,property investing tips,best suburbs to invest in sydney,locations real estate,prime location,property growth by suburb,capital growth suburbs
