What exactly is negative gearing?

The term Negative Gearing is often in the news. If you’re a current or potential property investor, it is important to understand what negative gearing is, and the benefits and risks associated with this from a financial perspective. Positive and negative gearing are terms you are likely to come across when you borrow money to invest. In short, any income earned from your investment can either be positively or negatively geared. A positively geared property means that the rental return (the rent you receive from tenants) is HIGHER than your combined costs of ownership, such as interest repayments and property outgoings, therefore the property generates financial profit. A property is negatively geared when the rental return is LOWER than your combined costs of ownership and the property runs at a financial loss. The key short term benefit derived through negative gearing is that any loss you incur on the property leads to tax deductions. The investor can then offset these deductions against other income earned (such as salary) to reduce the overall tax bill. Effective planning around investment property income and expense should always be taken into consideration as part of the pre-purchase planning stage. What you can claim as part of ownership costs? Australian tax law allows you to claim the interest portion of your loan repayments as deductible, and also various other expenses, providing the property is available and intended to be rented.What items you can or can’t claim is constantly under review, and the ATO has in

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