Is Negative Gearing a good Investment Strategy?
‘Negative Gearing: Is it a positive?’
Whilst I am not a Tax Accountant, my clients often ask me questions about Negative Gearing for property investment.
Generally, this involves reducing your taxable income by the amount that you spend on your investment. For example; you can claim your Interest Expenses, Body Corporate Fees, Management Fees, Repair and Maintenance etc, against your Income to reduce your tax Liability.
The idea is that you spend more on the Investment than you receive in Rent and then pay less tax. So it is essentially a short term saving on your tax bill. You are then relying on the property increasing in value to then make you money in the long term.
There is some speculation that in the future this may be subject to Federal Government changes.
So is it a good idea?
If I said to you, “Give me $10.00.” And in return I will give you $3.00 back. What would you think?
Essentially this is the same thing as Negative Gearing. To save $3,000 on your tax bill you may actually spend $10,000.
This is where an investment strategy that is positively geared may be a better option. While Brand New
Property also allows you to claim the depreciation on the building cost, and reduce your tax liability without actually being an ‘Out of Pocket’ expense.
We are currently marketing a Duel Income Property in QLD. At under $557,000 with a potential rental return of $640/week. This has the potential to make you more money than you would have to spend on the Mortgage on this property and actually make you money.