Negative gearing is a strategy of generating short to medium term tax losses which arise when the costs of owning an investment property exceed the income it produces.
Negative gearing allows property investors who make a loss to reduce their other taxable income and hence a tax saving/ refund. The savings generated can help pay for the investments partially.
Some typical deductions that owners can claim are interest on loan, repairs & maintenance, council rates and body corporate fees, insurance and tax depreciation for building and appliances used in the property like the hot water system.
In essence, Negative gearing can work if the money you make from the capital growth is greater than the loss you make in rental shortfall.
Negative gearing can be a tax efficient strategy if right financial and tax advice is considered before investing in a property. It is important to consult a professional regarding the risks involved and formulate appropriate plans.
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