Glossary of Property Investment Terms

Essential Australian property, finance, and tax definitions explained clearly.

A – D

APRA (Australian Prudential Regulation Authority): The statutory authority regulating Australian financial institutions, responsible for macroprudential lending benchmarks such as the 3.0% mortgage serviceability buffer.

Capital Gains Tax (CGT): Tax levied on the profit made from the sale of an investment property. Assets held longer than 12 months by individuals are typically eligible for a 50% CGT discount.

Depreciation (Division 40 & 43): Non-cash tax deductions reflecting the aging and wear of plant and equipment (Div 40) and building capital works (Div 43).

L – N

Lenders Mortgage Insurance (LMI): A one-off premium that protects the lender (not the borrower) when a property is purchased with a deposit of less than 20% (LVR > 80%).

Loan-to-Value Ratio (LVR): The loan amount expressed as a percentage of the property’s appraised value. For example, a $640,000 loan on an $800,000 property represents an 80% LVR.

Negative Gearing: Occurs when the deductible expenses of owning an investment property (interest, rates, maintenance, depreciation) exceed the rental income generated, creating a net rental loss deductible against other taxable income.

O – Y

Offset Account: A deposit transaction account linked to an investment loan. The balance reduces the daily interest calculated on the loan principal without permanently paying down the loan.

Redraw Facility: A mortgage feature allowing borrowers to withdraw extra loan repayments made above the required minimum. Unlike an offset account, redraw changes the loan balance and can impact tax deductibility if funds are redrawn for private use.

Rental Yield: The annual rental income of a property expressed as a percentage of its purchase price (Gross Yield) or net of all operating expenses (Net Yield).