Property, Straight Up with Warwick Brookes, featuring Christie Semmens of Semmens Partners

Most property owners spend their energy on the purchase itself: the suburb, the price, the negotiation. Far less attention goes to what happens after settlement, and that is often where the real financial damage or benefit occurs. In the latest episode of Property, Straight Up, Warwick Brookes sits down with Christie Semmens from Semmens Partners to unpack the tax and structural decisions that quietly shape an investor’s long term outcome. With the end of financial year approaching and genuine uncertainty hanging over negative gearing and capital gains tax, this conversation could not be more timely.

Christie is an accountant and registered tax agent whose firm, Semmens Partners, works with individuals, business owners, trusts, companies and self managed super funds. Her work sits at the intersection of everyday property decisions and the technical tax rules that determine whether those decisions pay off. What follows is a practical guide to the mistakes she sees most often, and what property owners should be doing right now rather than in another month’s time.

Getting Ready Before 30 June

According to Christie, a handful of simple steps before the end of financial year can make a meaningful difference. A tax depreciation schedule is one of the most commonly missed opportunities: many property owners simply do not know it exists, let alone that it can generate thousands of dollars in deductions each year. Timing repairs and maintenance is another consideration. If work needs doing on a property, completing it before 30 June rather than pushing it into the next financial year can bring the deduction forward.

Loan structure is also worth reviewing. Refinancing will not change this year’s tax position, but locking in a better rate is always worth investigating. Above all, Christy stresses record keeping. The Australian Taxation Office is conducting more audits than in previous years, and scrambling for receipts at tax time is a poor substitute for having them organised from the start.

The Settlement Date Mistake

One of the most costly misunderstandings Christie sees involves the timing of a sale. Many people assume their capital gains tax obligation is triggered by the settlement date. It is not. It is triggered by the contract date. This means a property sold in June, with settlement occurring the following month or later, still creates a capital gain in the financial year the contract was signed.

Warwick notes that owners in this position lose the chance to plan. Waiting even a few weeks before signing can buy an entire extra year before that tax bill falls due, and that extra year opens up strategies such as additional superannuation contributions to help offset the gain. There is one useful exception: if a contract is signed before 30 June but settlement subsequently falls through, the return can be amended and the gain does not need to be declared. But relying on that outcome is not a strategy. The lesson is straightforward: speak to a tax adviser before signing anything, not after.

Christie also points out that many owners do not know what their capital gain will actually be until it is too late to do anything about it. A short conversation with an adviser ahead of a sale, even at a modest cost, can save thousands in the long run.

Capital Works and the Cost Base Trap

Depreciation is frequently misunderstood as a free benefit rather than a timing mechanism. When an owner claims capital works deductions over the years they hold a property, those amounts must be added back to reduce the cost base when the property is eventually sold. Christie explains it plainly: capital works deductions are a valuable non cash benefit while you hold the property, but they still need to be added back for capital gains tax purposes at sale. Investors who forget this can be caught out by a larger than expected gain, particularly on off the plan purchases where depreciation has been claimed aggressively over many years.

Negative Gearing and Capital Gains Tax: Navigating the Limbo

Recent budget discussions have reignited debate over negative gearing and the capital gains tax discount, and Christie is candid about the difficulty this creates for advisers. Recommending that a client sell an investment property now, only for the proposed rules to never eventuate, could leave that client questioning the advice. Equally, deciding not to buy purely because a tax benefit might disappear is not sound reasoning either.

Her guidance is to return to fundamentals. A property should be purchased because the underlying investment case stacks up, not because of a tax deduction attached to it. Structure still matters greatly within that decision, whether that means individual names, a trust, or a company, and the right answer depends on the client’s income, goals and circumstances rather than a one size fits all formula.

One proposed change already causing serious concern is the removal of the pre capital gains tax exemption for assets acquired before September 1985. Christy describes this as one that was, in her words, snuck through, and notes that clients holding pre CGT assets now face difficult decisions about whether selling makes sense at all given the tax consequences that would follow. If the changes to the capital gains discount proceed, cutting it from fifty per cent to a lower base, Christy expects more investment activity to shift toward superannuation, though the changes are not proposed to start until 1 July 2027 and still need to pass the Senate.

Beware the Company and SMSF Spruikers

Both Warwick and Christie raise concerns about a growing trend: online commentators and property spruikers recommending increasingly complex structures such as buying through a company, funnelling funds through a second company, and then into a trust, or urging everyday investors to purchase property inside a self managed super fund regardless of whether the numbers support it.

Christy is blunt about the SMSF trend in particular. She has seen cases where a fund holds as little as ninety thousand dollars and a client is still being encouraged to buy property inside it, a scenario where the numbers simply do not work. A property purchased inside super only makes sense if it is genuinely expected to grow in value; buying for cash flow reasons alone inside an SMSF defeats the purpose, since an investor cannot have both strong positive cash flow and strong capital growth from the same asset. Clients also need to remember that property is an illiquid asset. Life events such as divorce or the death of a partner can force a sale at the worst possible time, and locking an entire super balance into one property removes the flexibility that a well diversified fund provides.

Choosing the Right Ownership Structure

There is no single correct way to hold property, and Christies approach always starts with the client’s circumstances. A couple with one high income earner and one non working spouse might buy in individual names, with ownership split heavily toward the higher earner, perhaps ninety nine per cent to one per cent. Asset protection concerns might point toward a trust or company structure instead. Testamentary trusts, once a popular estate planning tool, are themselves now facing potential legislative change, adding another layer of complexity to consider.

For those approaching retirement with a substantial super balance, an SMSF can make sense, particularly for commercial property. Business real property held in an SMSF allows a business owner to pay rent from their trading business directly into their fund, and for clients around fifty five and older approaching pension phase, the tax outcomes can be very favourable. But this only works with sufficient funds behind it, and Christie is careful to note that every structure decision needs its own conversation rather than a borrowed rule of thumb from a friend, a colleague, or an online forum.

Victoria’s Land Tax Squeeze

The conversation turns to land tax, and specifically the impact of Victoria’s lowered land tax threshold. Christie has seen a noticeable rise in clients selling investment properties over the past two to three years, largely because rental increases have not kept pace with rising land tax bills. Warwick’s own observations from real estate agencies back this up, with some rent rolls reportedly shrinking by fifteen to twenty per cent as investors exit the market. Christie links some of this back to pandemic era government support payments, suggesting the current tax increases are, in part, a mechanism to recover funds distributed broadly during that period.

Why a Depreciation Schedule Pays for Itself

Christie strongly recommends every investment property owner commission a tax depreciation schedule from a qualified quantity surveyor. The fee is tax deductible, and in most cases the schedule pays for itself within the very first year through the deductions it unlocks. It is a straightforward, low risk step that many owners simply overlook.

She also draws an important distinction between a tax deduction and cash flow. A deduction reduces taxable income; it does not put cash back in an owner’s pocket. If an investor on a combined marginal tax rate of thirty seven per cent spends ten thousand dollars on a repair, the resulting deduction is worth around three thousand seven hundred dollars in reduced tax, but the investor is still out of pocket for the full ten thousand dollars in cash terms. Understanding this distinction helps owners set realistic expectations about what deductions can and cannot do for their finances.

Interest Only Versus Principal and Interest

Interest only loans were far more common a decade ago, largely as a way to manage cash flow on negatively geared properties. Christie notes that fewer clients choose this path today, with most now opting for principal and interest repayments to build equity over time. The risk with an interest only loan is straightforward: if the property does not grow in value, the owner is left holding the same level of debt they started with and nothing to show for it. As Warwick puts it, there is little point going interest only on a property that is not going to appreciate.

Quick Fire: What Happens If…

The episode closes with a rapid run through of common scenarios property owners ask about.

Moving out and renting out your home

Owners can generally continue treating a former home as their main residence for capital gains tax purposes for up to six years while it is rented out, under what is known as the six year absence rule. A market valuation at the time of moving out is important if that six year window may be exceeded, and owners should keep evidence such as utility connection records to demonstrate genuine occupation if the ATO ever asks.

Inheriting a property

The tax outcome depends on when the deceased originally acquired the property. If it was purchased before September 1985 and sold within two years of inheritance, there is no capital gains tax at all. If it was purchased after that date, the inheritor’s cost base becomes whatever the deceased’s cost base was at the date of death.

Renovating before selling

Renovation costs are not treated as a repair for tax purposes. Instead, they are added to the property’s cost base, which reduces the eventual capital gain. A property bought for seven hundred thousand dollars with one hundred thousand dollars in renovations effectively has a new cost base of eight hundred thousand dollars.

Airbnb and short stay letting

This is treated much like standard rental income, with income declared and expenses claimed accordingly. It becomes more complex when the property is also the owner’s main residence, where short stay letting part of the home can put the main residence exemption at risk.

Children moving into the property

There is no special tax treatment or main residence exemption simply because a family member has moved in, and rent charged should reflect market rates or the ATO may disallow related deductions.

Buying with siblings or parents

Co ownership across generations can create mismatched objectives, particularly where older co owners want to access their equity sooner than younger ones. Chrisie recommends a clear co ownership agreement setting out what happens if one party wants to sell, since the tax treatment itself, with each owner declaring their share of income and deductions, does not resolve those practical tensions.

The Takeaway

The theme running through this conversation is that property ownership is about much more than the asset itself. Structure, timing, record keeping and early advice all shape the financial outcome as much as the property’s performance in the market. A few practical habits emerge for any property owner or investor to take into 30 June and beyond.

• Get a tax depreciation schedule in place for any investment property, and do it early rather than as an afterthought.
• Talk to your accountant before signing a contract to sell, not after, since the contract date rather than the settlement date determines when capital gains tax applies.
• Remember that depreciation and capital works deductions are added back to your cost base when you sell, so factor this into any expected gain or loss.
• Be sceptical of generic structure advice from friends, forums or property spruikers promoting company or SMSF ownership. What works for one investor’s circumstances may be entirely wrong for another’s.
• Keep thorough records throughout the year, including for any period a property is genuinely used as a main residence, since the ATO is conducting more audits than ever.

As Christie puts it, sometimes the biggest property mistakes are not about the property at all. They come from the structure, planning and financial decisions sitting behind it. A conversation with your accountant before you buy, sell, renovate or restructure can be the difference between a smart outcome and an expensive surprise.

This article is based on an episode of Property, Straight Up featuring Christie Semmens from Semmens Partners. You can find out more about their tax, accounting and superannuation services at semmpart.com.au.

You can watch or listen o the podcast here:

Audio – https://www.buzzsprout.com/2609119/episodes/19455309

Video – https://youtu.be/IM40jNn-QPk