| What is Negative Gearing?

Gearing is when you borrow money to invest in a property.

A property is negatively geared when your rental return is less than your outgoings and interest.  If your property is negatively geared you are possibly eligible for a tax concession.

Why Use Negative Gearing

The key benefit to using negative gearing, is that you can deduct the net loss on a rental property from your taxable income.  Using negative gearing tax concessions can help you to minimise any losses while waiting for long-term capital gain.

Is negative gearing an effective tax strategy?

To evaluate if negative gearing is effective for you, firstly you need to carefully assess your rental income, property related expenses, taxable income and capital growth prospects. It is advisable speak with a trusted financial advisor before deciding on the your investment strategy

Purchase price

The purchase price is your starting point. It is important to buy well and not over-pay. Your purchase price directly governs your capital and interest payments.

Rental Income

Your rental income is a vital factor in calculating your negative gearing deductions. You need to be competitive with your rent whilst covering your costs. Quite often a balancing act! Remember that your home loan repayment isn’t the only cost of owning a rental property.

Expenses to Consider

Negative gearing allows you to deduct the expenses of maintaining and renting out your property. These expenses may include:

  • Repairs and maintenance (Plumber, Electrician, Handyman)
  • Renovation costs
  • Pest control
  • connecting utilities and services
  • Finding new tenants (advertising)
  • Land tax & Council rates
  • Accountant’s fees
  • Legal fees & Insurance
  • Strata and body corporate fees
  • Damages if you have problem tenants

Depreciation

Not every cost associated with the upkeep of you rental property can’t be deducted all at once. These items are depreciated over a number of years.

This is where a good accountant / financial advisor is important. Generally speaking item that are covered by depreciation are items that you have purchased specifically for your rental property that decrease in value over time.

You can also claim deductions for improvements that you have carried out on the property. This may also include capital works (construction costs) – Important to get professional advice.

You can only make money from negative gearing if your long-term capital growth is greater than the loss you make from rental.

It is important to seek the advice of a professional financial adviser, tax agent or accountant.


Disclaimer:  Although all care is taken.  We do not give any warranty whatsoever to the accuracy of any content.
This is not meant to be financial or professional advice and is only of general nature.  You must seek professional advice before taking any actions. The above information comes with no warranties whatsoever.  We take no responsibility for any actions you may or may not take. All content is of general nature only and is NOT to be taken as advice whatsoever

Gino Sotto

Residential Sales Agent
Raine & Horne Parramatta

P: 0426 228 014
E: gino@rhparramatta.com.au
W: raineandhorne.com.au/parramatta

TESTIMONIALS:

Gino’s professional attitude and friendly nature was a breath of fresh air.  Thank you for your support and professionalism throughout the sale of our property.  Appreciate the extraordinary lengths you went to to achieve an outstanding result!
Jeanne Appleton, Northmead. NSW

Excellent communication and great confidence when negotiating with buyers. Gino focussed his attention on achieving a sale price well above our expectations. Well done Gino and your selling team.
Ralph and Maryanne Pasero, Rydalmere NSW

I found the sales team at Raine and Horne Parramatta a pleasure to deal with. Their expertise and continuous updates in selling our home was outstanding. Great work Gino!
Rochelle and Casba Webb , Parramatta NSW

A genuine performance-based selling agent Gino Sotto helped us achieve a quick sale, which saved us a lot of time and money. We would not hesitate recommending Gino & his sales team to others.
Lawrence and Kim Davies . North Rocks NSW

We were delighted with Gino Sotto and the sales price achieved for our house and the specialist approach to selling residential real estate in our area.
Danny and Manal Ayoub Merrylands NSW