Negative Gearing

Negative Gearing generally means that the costs associated with the property exceeds the rental income it earns each year, creating a loss.

A large part of the deduction comes from the cost of interest on the mortgage, rental fees, and property repairs and maintenance, which are tax deductible. This loss can then be offset against your assessable (taxable) income to enable a larger tax refund or reduction in tax.

While ‘negative gearing’ is a bit of a buzzword, and it seems to offer excellent advantages, the key is not to over commit – don’t pay out more than you can afford just to get a bigger tax refund. As always, you should seek expert advice from a finance professional or accountant before you decide that any approach, including negative gearing, is right for you.