Negative Gearing, Tax Deductions and

Property Investment

When looking at property investment, it is important to consider negative gearing. A rental property is negatively geared if the costs of the investment, including the interest on borrowed funds, are greater than the income received.

Investment Property costs included in your sums:

1 Rates, water connection, house and building insurance and strata;
2 Land tax (in some states and in some situations dependent on value of land);
3 Agent management fees and other professional services such as accountant and solicitor costs;
4 Maintenance and repair costs;
5 Depreciation of new buildings, improvements or internal contents; and
 6 Interest on your mortgage to purchase the investment property and interest on money required to undertake improvements or pay for outgoings.


If the total of these costs is greater than the rental income you receive, the loss can be offset against your income and potentially reduce the total amount of tax payable – this is called negative gearing.
 
Always check with your accountant as to what deductions you are entitled to and whether negative gearing is beneficial to your individual situation.
 
Important note: In order to be making a healthy return on your property investment, the value of the property should increase by more than the actual after tax loss you make on the property.


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