You should always get advice before investing, especially before buying a property—not after. Once purchased, it becomes very expensive to make changes.
If a property is properly structured, it can mean the difference between paying a significant amount of tax and paying far less.
James and Olivia* are a young couple. James works in a sales role and is in the top tax bracket (around 45% plus Medicare levy), while Olivia works in a professional role and is in the 37% tax bracket.
Client Profile
James and Olivia came to us with the following financial position:
- Primary home purchased in late 2024 with an outstanding mortgage of $400,000
- No other debt
They wanted to know whether it was better to pay off their mortgage, invest in property, or build a share portfolio.
The Challenge
- Should they invest in property or shares?
- Whose name should the investment be under?
- Does a trust structure make sense?
- How can land tax be minimised over time?
- How can their high income be used strategically?
3 Taxes to Consider for Property Investors
- Income tax (short and long term)
- Capital gains tax (long term)
- Land tax (varies by state and ownership structure)
Our Approach
1. Why Property Instead of Shares
The key advantage is leverage.
- $200,000 in shares → $400,000 portfolio at 50% LVR (loan of $200,000)
- $200,000 in property → $1,000,000 asset at 80% LVR (loan of $800,000)
This means $1 million is working for you instead of $400,000. Over 20–30 years, this creates a significantly larger outcome.
2. Structuring for Tax Efficiency
- Purchase the first property under James’s name
- Maximise negative gearing benefits at a 45% tax rate (vs 37%)
3. Considering a Property Investors Trust
We advised against it at this stage due to:
- No immediate asset protection concerns
- No land tax advantage in their state
- Additional setup and ongoing costs
A direct ownership structure was simpler and more cost-effective.
The Result
- A clear strategy for current and future property purchases
- Confidence in using equity effectively
- A tax-efficient ownership structure
- A long-term plan to grow their portfolio while managing land tax
Property Investment Structuring for Long-Term Growth
Building wealth through property is not just about choosing the right asset. Structuring correctly from the beginning is key. Small early decisions can have a significant long-term impact.
About Chan & Naylor
Chan & Naylor helps clients structure smarter, invest strategically, and build long-term wealth with clarity and confidence.
*Names have been changed for privacy.
Disclaimer
This article serves as general information only and may not account for the unique circumstances of individual readers. For personalised and strategic solutions tailored to your specific situation, we invite you to seek professional advice from Chan & Naylor. Our highly experienced team is dedicated to helping you navigate the complexities of Australian taxation, ensuring that your financial strategies align with the latest regulations. Contact us today to embark on a path of informed and customised tax planning for your property investments.
