Negative Gearing in a Nutshell
Did you know that owning an investment property can provide tax benefits through a process known as negative gearing.
It’s true and is a nice bonus as the taxman helps you cover the cost of owning an investment property but it should never be the reason for investing in property – just one of the side benefits – but how does it work?
In layman’s terms, negative gearing is a term that is used to describe the situation where you have an investment where the income that you receive is less than the cost of holding that investment.
So, when talking about an investment property, it means that the rent that you get is less than what you pay in interest expenses on the loan, repairs, property management fees and other costs associated with holding the property.
It means that the property is running at a loss and this loss can be offset against all other income that you receive so you will end up paying less tax.
This information is not meant to replace advice from your accountant and you should naturally make your own enquiries before acting on this.