Select the are of Interest for Property Investment:
About 'positive' and 'neutral' gearing
As mentioned under the section of 'negative' gearing, the term 'gearing' refers to the off-setting of expenses incurred in respect of an income earning activity against the primary assessable income of the taxpayer.
Where the deductions associated with an income earning activity are less than or equal to the actual income received from that activity, the process of off setting the deductions is referred to as 'positive' or 'neutral' gearing respectively. In relation to property investment, a property will be geared 'positively' or 'neutrally' if the rental income derived from the investment property exceeds or equals the deductible expenses (such as interest payments, rates and land tax) associated with that property.
In these circumstances, deductions associated with the investment property will not be sufficient to reduce the tax payable on the investor's primary assessable income.
Typically, as an investor's equity in their investment property increases, a property which may initially have been used as a negative gearing vehicle, will become geared positively.
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