Negative Gearing

Negative gearing is where a tax deduction can be made for the difference in what a property costs as compared to its income.

An example would be where the sum of the costs consisting of interest on the loan, the depreciation, management fees and other ongoing costs may add to $42,000 per annum, but the rental income may only equal $17,500.

This would result in a situation where the entity that owns the property could reduce its taxable income by $24,500.

It is important to consult the services of an investment property accountant to make sure you are maximising your claims when investing in property.