Negative Gearing - Investing In Property Australia

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Negative Gearing

Tax relief is one of the benefits of direct property investment. Direct property investment involves the purchase of property rather than investing in property trusts. Suppose an investor purchases a property using borrowed funds and the interest repayments, together with other expenses, exceed the income from the property.

With negative gearing, depending on your personal circumstances, some of the losses may be deductible from your taxable income. However, property experts warn that your investment decision should be driven by the viability of the asset – not just by the desire to minimize tax.

So what tax deductions are actually available to a property investor?

Deductions, or expenses, may be offset against rental or other assessable income. Expenses that can be deducted from the rental income include:

loan interest;
body corporate fees;
local government and water rates;
land tax;
gardening expenses;
costs associated with advertising for tenants;
and depreciation.

Depreciation refers to the writing-down of the cost of an asset over its estimated life. This form of deduction is allowed for assets such as furniture, carpet, and washing machines. You can claim a proportion of each item of depreciable assets each year over its effective life.

There are different ways of calculating your depreciation. The one you choose should be decided in consultation with your accountant.

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