What are the benefits of negative gearing?
Positive gearing occurs when you receive more in rent from your tenants than what you pay on the likes of loan repayments, interest, property maintenance and rates. This tends to happen at times when rents are high due to strong demand and interest rates are low
A negatively geared investment is one where the interest on the amount borrowed exceeds the net income received from the investment’s rental income. The ATO allows investors to claim a tax deduction on the difference between the interest paid and the net income from the property. When buying an investment property in this or any other way, you need to realise the full tax implications, so you can make the right choices for your circumstances. Negative gearing can provide tax benefits for many people. We advise that each situation is different and to ensure you have the correct advice to help you decide whether negative gearing is right for you.
When your investment property is negatively geared, you may be entitled to deductions such as:
- The interest on the loan
- The costs of setting up the loan, including establishment fees
- Letting agent fees to manage the property
- The cost of advertising for tenants
- Council rates and land tax
- Owners’ Corporation levies
- Insurance premiums
- Depreciation of fixtures and fittings, including furniture
- Repairs and maintenance
The key benefit of negative gearing is that it enables you to offset costs associated with your loan and renting the property against your tax bill — and at the highest rate of tax that you pay.
Give us a call to discuss your situation and book an appointment for some confidential advice.
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