Investment is a way people use their money to try and make more money or gain assets. You can invest your money in a number of ways. The common areas where people like to invest their money are:
buying a rental property
buying shares
buying units in a unit trust
buying units in a managed investment fund
saving their money in banks or other financial institutions.
If you receive, or reasonably expect to receive, assessable income from your investment, you can claim deductions for many of the expenses you incur. You cannot claim expenses which are private or capital in nature.
Examples
Jo takes out a bank loan to buy shares, from which she expects to receive income in the form of dividends. She can claim a deduction for the interest on the loan.
Andrew owns a holiday home, which he rents out for nine months of the year. For the other three months, he stays in it himself. One-quarter of expenses such as rates and mortgage interest relate to his private use of the property and are not deductible.
Pam has won some money and decides to invest it, but as she doesn’t have much experience in the money market, she seeks help from a financial adviser. His fee for drawing up an initial investment plan for her is not deductible, as it is capital in nature.
Shares, units and rental properties are all assets which if you sell you may need to pay capital gains tax on any profit you have made.
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