You may come across a variety of words and phrases which are used in the real estate industry that you don’t know the meaning of - particularly words which relate to investment properties and tax.
Our alphabetical listing of real estate related words and phrases should hopefully help you out.
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
adjustable value of a depreciating asset for decline in value purposes is the initial up-front cost of the asset less the total amount of decline in value deductions that have been claimed for the asset, or which could have been claimed if the asset had been used solely for income producing purposes.
adjustments are minor variations to the purchase price of a property to take into account outgoings such as the rates on the property, land tax and the cost of discharging any existing mortgage, and income such as rental (if the property is rented out when it is sold).
agency agreement is a written agreement that sets out the terms and conditions upon which a property owner appoints a real estate agent to sell the owner’s property.
arms length is where a seller and a buyer are not in any way related, and are dealing with each other on a commercial basis.
Australian Business Number or ABN is an 11 digit number unique to each business in Australia that is registered for GST purposes.
Australian Taxation Office or ATO is the federal government department that has responsibility for the administration of the federal taxation system in Australia.
body corporate fees are fees payable to a unit or townhouse body corporate to cover things such as insurance for the building, and maintenance and repair of common areas.
borrowing expenses means the costs of taking out a loan to buy a property, and include loan application or establishment fees, bank valuation fees, document preparation fees, stamp duty on the mortgage, title search fees, titles office registration fees and mortgage insurance.
building and contents insurance is insurance which provides protection against financial loss in the event of damage to or destruction of the building or contents.
capital gains tax or CGT is a tax that may be payable when a property is sold.
capital growth is an increase in the value of a property.
capital proceeds from the sale of a property will generally be the price that the buyer pays for the property.
capital works deductions (which were previously called special building write-off ) is a tax deduction similar to decline in value deductions that a property owner is entitled to claim in relation to the construction cost of buildings that were constructed after 18 July 1985 and certain other structural improvements constructed after 26 February 1992.
CGT discount is the discount by which the capital gain made on the sale of a property is reduced before including the gain in the owner’s assessable income. The discount is 50% for individuals and trusts.
comparative market analysis is a written report that compares a property with similar properties that have recently sold in the same area, and includes a description of the similar properties and details of how much they were originally listed for, how long they were on the market before they sold, and how much they finally sold for.
conditional contract is a contract that is subject to finance, building inspection, pest inspection or any other conditions.
conveyancing is the process of transferring legal title to a property from one person to another.
conveyancing searches (sometimes called property searches) are the searches on a property that a solicitor will ordinarily carry out as part of the conveyancing process to ensure that the property is not subject to any third party interests or adversely impacted in some other way.
cost base of a property for capital gains tax purposes is the original cost of the property plus certain associated costs less any capital works deductions that have been claimed. The cost base is compared to the capital proceeds from the sale of the property to work out whether there has been a capital gain on the sale of the property.
current title extract is a search carried out with the Department of Natural Resources and Water to confirm ownership of a property.
Decline in value is a tax deduction that a property owner is entitled to claim in relation to the cost of certain assets (called depreciating assets) over the effective life of the assets.
Department of Natural Resources and Water (or DNRW) is the Queensland Government Department that has responsibility for the land title system in Queensland.
depreciating assets are assets for which decline in value tax deductions can be claimed. In an investment property this would include things like the stove, hot water system, curtains and blinds, floorcoverings and other items which are installed in or on the property and which are available for use and enjoyment by the tenant.
depreciation is the common name for decline in value tax deductions.
diminishing value method is one of the two methods for calculating the decline in value of depreciating assets for income tax purposes. The other method is the prime cost method. The diminishing value method results in a higher decline in value deduction in the early years of the effective life of the asset, but the available deduction gets progressively smaller each year.
duty or stamp duty is a State Government imposed tax that is payable in respect of a variety of transactions, including sale contracts and mortgages.
effective life of a depreciating asset for decline in value purposes is an estimate of the period of time that the asset can be used for income producing purposes, assuming that it will be subject to wear and tear at a rate that is reasonable to assume, and the asset will be maintained in reasonably good order and condition.
emergency repairs are work needed to repair a burst water pipe, a blocked or broken toilet, a serious roof leak, a gas leak, a dangerous electrical fault, serious storm, fire or impact damage, a failure or breakdown of the gas, electricity or water supply to the premises, a fault or damage that makes the premises unsafe or insecure, and certain other faults.
entry condition report is a written record of the condition of an investment property at the beginning of a tenancy.
excluded fixtures are items that are fixed to land, or fixed to any structures on the land, that are expressly excluded from a sale by being listed in the sale contract.
exclusive agency is a method of listing a property for sale that involves giving a single real estate agent the sole and exclusive right to market and sell the property. When the property is sold the agent is entitled to a commission on the sale irrespective of how the buyer was introduced.
exit condition report is a report on the condition of a property at the end of a tenancy.
fair wear and tear are changes to the physical condition of a property caused by normal use and aging.
First Home Owner Scheme is a scheme introduced by the Federal Government to help offset the impact of the Goods and Services Tax on first time home buyers, and involves a non-means tested grant of $7,000 to eligible first home buyers.
first principal place of residence is a person’s home (or primary home where the person owns more than one home), where the person has not previously owned a home.
fixed rate loan is a loan where the interest rate payable on the loan is fixed or ‘locked in’, and cannot change, for an agreed period of time (usually ranging from 1 year to 5 years, but can sometimes be up to 10 years).
fixed term tenancy is a tenancy that is for a fixed period of time, commonly 6 or 12 months.
Foreign Acquisitions and Takeovers Act 1975 is the federal law that requires foreign buyers to obtain foreign investment approval before buying a residential property in Australia.
Foreign Investment Review Board or FIRB is the federal government body to which applications for foreign investment approval must be made.
Foreign Ownership of Land Register Act 1988 is the Queensland law that requires a foreign person who buys or sells a residential property in Queensland to give notice of that transaction within 90 days after the purchase or sale takes place.
full unencumbered value means the full market value of a property.
gearing means borrowing money to invest in assets which are expected to produce income and experience capital growth over time, such as residential property or shares.
general tenancy agreement is the prescribed form for residential tenancy agreements in Queensland.
Goods and Services Tax or GST is a broad based 10% tax on the supply of most goods and services in Australia.
gross income means income before tax.
house and contents insurance provides protection against financial loss in the event of damage to or destruction of the building or contents.
improvements are substantial additions or alterations to a property.
included chattels are items that are in or on a property that are not fixed to the land or fixed to buildings on the land, but which are expressly included in a sale by being listed in the sale contract.
income protection insurance is insurance which provides for a payment (generally monthly) of up to 75% of a person’s usual salary or wage if they are unable to work due to illness or injury.
initial repairs are repairs to a property to remedy defects, damage or deterioration which existed at the date that the owner acquired the property. It doesn’t matter whether or not the owner was aware of the need for the repairs when the property was acquired.
Instalment Activity Statement is the form that a person is required to complete and return to the ATO if they are required to pay PAYG tax instalments.
interest offset account or mortgage offset account is a savings account which is linked to a borrower’s loan account. The loan account and the interest offset account are two separate accounts (unlike a revolving line of credit), but the two accounts are linked so that the interest earned on any money deposited into the interest offset account is offset against the interest which accrues on the loan.
interest only loan or IO loan is a loan under which the borrower makes regular (usually monthly) interest payments on the loan, but does not repay any of the principal until the end of the loan, or until the end of a fixed period after which the loan reverts to principal and interest.
landlord protection insurance or investment property insurance provides protection against intentional or accidental damage to an investment property caused by the tenant, the theft of property by the tenant, unpaid rent (if the tenant leaves owing rent), loss of rent as a result of damage to the property, and the 'replacement' of lost rent if the tenant breaks their lease or departs without notice.
land tax is an annual tax levied by the Queensland Government on owners of freehold land in Queensland (including both vacant land and land which has been built on).
letting fee is a fee, usually equal to one weeks rent, charged by a real estate agent who is managing an investment property each time the agent finds a new tenant for the property.
loan to value ratio or LVR means the amount of a loan or loans expressed as a percentage of the value of a property.
location report is a report by a licensed surveyor that indicates whether or not any existing fences are positioned on the correct legal boundaries, the house or other improvements on the property encroach onto adjoining land, or houses or other improvements on adjoining land encroach onto the property.
maintenance is work done to prevent or anticipate defects, damage or deterioration to a property.
management agreement is a written agreement that sets out the terms and conditions upon which a property owner appoints a real estate agent to manage the owner’s investment property.
management fee is the fee that a real estate agent charges for managing an investment property, and is usually about 7½% to 8½% of the rent collected (plus GST).
median sale price is the sale price of the middle property when all sales in the relevant area are arranged in price order from highest to lowest. Where there is an even number of sales, the average of the two middle sales is the median. The median sale price is quite different to the average sale price, which is calculated by adding up all the sale prices and dividing by the number of sales.
mortgage is a legal right that a lender takes over a property as security for repayment of a loan.
mortgage insurance (sometimes called lenders mortgage insurance or private mortgage insurance) provides protection to your lender in the event that you default on your loan. Mortgage insurance does not protect or benefit you.
mortgage protection insurance or mortgage repayment insurance provides cover for the amount of your usual loan repayments in the event that you are unable to make those payments due to illness or injury, or certain other circumstances (such as retrenchment from your job).
multiple listing or multi-listing is a method of listing a property for sale that involves an owner appointing a primary agent to market and sell a property, but that agent works with a co-operative network of agents each of whom can introduce a buyer to the property and effect a sale.
multiple unit dwelling is a building that consists of two or more separate residences that are not on separate legal titles, and often consist of a large older style house which has been converted into two or more flats.
negative gearing is where the interest and other expenses associated with an investment property exceed the income produced by the investment property.
Office of State Revenue or OSR is the Queensland Government Department that has responsibility for the assessment and collection of stamp duty and land tax in Queensland, and the administration of the First Home Owner Scheme.
official interest rate is the official cash rate target set by the Reserve Bank of Australia. Changes in the official interest rate result in changes to the interest rates charged by lenders.
open listing is a method of listing a property for sale that involves the owner engaging two or more separate real estate agents to market and sell the property, on the basis that whoever introduces the eventual buyer to the property is entitled to the full commission on the sale.
pay as you go or PAYG is a system for reporting and paying tax on investment income that commenced operation on 1 July 2000 and replaced the old provisional tax system.
percentage return means the total rent that an investment property earns each year, expressed as a percentage of the value of the property.
periodic tenancy is a tenancy that is not for a fixed term.
positive gearing is where the income produced from an investment property exceeds the associated interest and other expenses.
pre-purchase inspections are inspections that a buyer may wish to have carried out on a property, the most common of which are a building and pest inspection.
prime cost method is one of the two methods for calculating the decline in value of a depreciating asset. The other method is the diminishing value method. The prime cost method results in the same decline in value deduction being available each year over the effective life of the asset.
principal and interest loan or P&I loan is a loan where each loan repayment consists of a repayment of some of the principal amount of the loan, together with interest on the outstanding balance, so that at the end of the term of the loan the entire amount borrowed has been repaid together with interest.
principal place of residence is a person’s home (or primary home where the person has more than one home).
principal sum secured is the amount of a loan (or loans) that is secured by a mortgage.
project home is a house built by a builder using the builder’s own standard designs and specifications.
public liability insurance is insurance which provides protection against liability to third parties who may be injured upon a property.
quantity surveyor is an expert who can identify and value the depreciating assets which are contained in an investment property.
Queensland Building Services Authority or QBSA is a Queensland Government body responsible for regulating the building industry in Queensland, and administering a statutory insurance scheme that protects consumers against defective building work in certain circumstances.
Queensland Law Society or QLS is the professional association for solicitors in Queensland. One of the main objectives of the QLS is to help protect the rights of individuals, and to increase community understanding and awareness of the law.
Real Estate Institute of Queensland or REIQ is an industry body representing the real estate industry in Queensland.
re-draw facility is a feature available with some home loans that allows the borrower to redraw amounts which have already been paid off the loan.
reduced cost base of a property for capital gains tax purposes is the original cost of the property plus certain associated costs. The reduced cost base is compared to the capital proceeds from the sale of the property to work out whether there has been a capital loss on the sale of the property.
REIQ Contracts are standard form sale contracts approved by the Real Estate Institute of Queensland and the Queensland Law Society.
REIQ Contract for Houses and Land is a standard form contract that has been approved by the Real Estate Institute of Queensland and the Queensland Law Society for use for the sale and purchase of vacant land or residential houses in Queensland.
REIQ Contract for Residential Lots in a Community Titles Scheme is a standard form contract that has been approved by the Real Estate Institute of Queensland and the Queensland Law Society for use for the sale and purchase of a unit or townhouse.
repairs means fixing defects in, damage to, or deterioration of a property where the defect, damage or deterioration has resulted from accidental or deliberate damage, the operation of natural causes, or ordinary wear and tear.
rental bond is an amount of money paid by a tenant that is intended to be available for the financial protection of the landlord in the event that the tenant breaches the tenancy agreement.
rental guarantee is a guarantee given by a property developer to a buyer that the property will provide an annual rental return, for the first 12 months or 2 years, equivalent to a certain percentage of the purchase price of the property (such as 7% or 8%).
Residential Tenancies Authority or RTA is a Queensland Government authority that administers the Residential Tenancies Act and Regulation, and provides advice and other services to landlords, tenants and real estate agents in Queensland.
revolving line of credit is essentially a home loan and savings account all rolled into one. Instead of having separate loan and savings accounts, there is only a single account. The amount of the loan is debited to the account, and all of the borrower’s subsequent receipts and payments flow through this one account.
routine repairs are any repairs other than emergency repairs.
sale by auction is where buyers do not know what price the seller is willing to sell for, and buyers openly bid against each other to acquire a property. The sale contract must be unconditional.
sale by listed price is where a property is advertised for sale with a price, or price range, that the seller is hoping to achieve. The sale contract may be conditional or unconditional.
sale by negotiation is where a property is advertised for sale without a price, or price range, that the seller is hoping to achieve. The sale contract may be conditional or unconditional.
sale by tender is where buyers are required to lodge written offers by a set date. The sale contract may be conditional or unconditional.
sale contract means a contract for the sale of a property.
service charges are charges for the supply of certain services to a property, including electricity, telephone, gas and, in some cases, water.
settlement date (sometimes called the completion date) is the date when the buyer pays the balance of the purchase price for the property, and in return receives possession of the property and legal title to the property.
small claims tribunal is an informal court which is part of the system of Magistrates Courts in Queensland, and which has responsibility for hearing disputes between landlords and tenants.
sole agency is similar to an exclusive agency, except that the owner is also entitled to sell the property themselves. If the owner finds a buyer then the agent is not entitled to any commission on the sale.
special conditions in a sale contract are clauses that are included in the contract that are not part of the standard contract.
stamp duty or duty is a State Government imposed tax that is payable in respect of a variety of transactions, including sale contracts and mortgages.
taxable value of the land owned by a person for land tax purposes is the total unimproved value of all land owned by the person as at 30 June in the relevant year, less the amount of any deductions applicable to the person.
tenancy agreement is a written agreement which sets out the terms of a tenancy and the rights and obligations of the landlord and the tenant.
termination value of a depreciating asset is the amount received by the owner upon the sale, loss or destruction of the asset.
travel expenses are expenses incurred by a property owner for travel to and from their investment property to collect rent from the tenant, to perform repairs or maintenance to property, or to inspect the property.
unconditional contract is a sale contract that is not subject to finance, building inspection, pest inspection or any other conditions.
unimproved value of land is the value of the land itself, ignoring any buildings or other improvements on the land.
variable rate loan is a loan where the interest rate payable on the loan is not fixed or 'locked in', but which can change at any time as official interest rates change.
written down value of a depreciating asset is the initial cost of the asset less any decline in value deductions that have actually been claimed by the owner.