Property Investment in South East Queensland Australia

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What is 'negative' gearing?

As a general principle, where a taxpayer borrows money and invests that money for the purpose of earning assessable income, interest on those borrowings will be deductible.

The term 'gearing', in a tax context, generally refers to the off-setting of expenses incurred in respect of an income earning activity against the primary assessable income of the taxpayer. 'Negative gearing' occurs where the deductions associated with an income earning activity exceed the income received from that activity. In these circumstances, the excess deductions may, if certain criteria are met, be used to reduce the tax payable on the primary assessable income of the taxpayer.

Possibly the most common example of negative gearing occurs in the property and share markets. Typically, an investor borrows money to acquire property or shares. On general tax principles, the interest on the borrowings will be deductible if the money was borrowed to acquire an income producing asset, such as a rent-producing property.

If the acquired property is 'highly geared' the interest payments associated with the investment property may exceed the income derived from that property. This will enable the interest payments which exceed the income from that property to be used to reduce the tax payable on the taxpayer's other assessable income.

Before any investor acquires property with the intent of utilising it as a negatively geared investment, Equitygear recommends that they discuss their intentions with their professional advisers. The Commissioner of Taxation has made it clear that not all interest on negatively geared investments will be deductible. If there is no intention at the time of acquiring the property that the negative returns from the property eventually become positive returns, or if the expenses relating to the property are disproportionate compared to the income derived from the property, and this can not be explained by reference to some objective other than tax minimisation, the Commissioner ma

Simply Fill Out The Form Below - It's Easy! * First Name: * Last Name: * Address 1: * Address Suburb: * Your email address: * City: * Postcode: * Phone: * Av Household Income: Please Select 0-$39,999 40,000-$59,999 $60,000-$79,999 $80,000 + * Home Owner: Yes, I am Not as Yet If Yes, How Much Equity?: Select if Home Owner 0-$49,999 $50,000-$79,999 $80,000-$119,999 $120,000+ * Enter the security code shown:

Negative gearing considerations

Financial circumstances

The suitability of entering into a negative gearing arrangement is dependent upon a variety of considerations. Specific considerations of an individual that may support the suitability of negative gearing include the following:

• Current equity in their residential home or other assets;
• A steady and secure income, whether it be from salary and wages or other sources;
• The annual taxable income is in the higher income tax bracket, i.e., over $40,000 per annum;
• Currently there are contributions being made to a superannuation fund to assist with their retirement plan;
• They currently do not have direct property ownership or other investments, with the exception of their principal place of residence.