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Negative Gearing. |
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If you have borrowed money to buy an investment property, you'll be making loan repayments. If you are renting the property out, you'll be receiving income from the property in the form of rent from your tenants if the interest component of your loan repayments plus any other investment expenses is more than the income you receive from rent, you can claim the difference as a tax deduction. This is negative gearing and it may reduce your taxable income and thus save you money on tax.
For example:
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Your rental income from property is $1200 per month. |
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You are making loan repayments with an interest component of $1600 per month and with council rates, water rates and other expenses of $150, your total outgoings are $1750 per month. |
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You therefore have a shortfall of $550 per month ($6600 per year), which you may be claim as a tax deduction. |
For further information on the benefits of negative gearing, contact the Australian Taxation Office on 13 28 61.
