Searching for an Investment Property: Negative Gearing Explained

Negative gearing is when you borrow money to make an investment, and the income from the investment is less than the expenses. It is commonly used for property investments, where rental income may be less than other expenses.

It comes as a popular investment strategy in Australia. It is not for everyone, however. There are times when negative gearing can work as beneficial, and times when it won’t be. Before committing to anything, it is important to discuss this strategy with industry professionals to see if it would suit you.

Why should you consider negative gearing?

negative gearing explained

One of the main reasons why many Australians decide to go down this path is because of the return of investment in high growth areas. Australia is widely considered a massive ever-growing market, meaning that if you make an investment, there’s a high chance you’ll realise some capital growth that you’re wanting.

Negatively geared properties are scattered through Australia. Meaning you have free rein over almost anywhere in the country. But also you will have the ability to pick and choose top target areas that have steady growth potential.

Negative gearing can be a fantastic idea if you are wanting to save on tax. You should consider your account depreciation of assets. Through a negative gearing investment, you will be able to get big tax refunds that can transform a negatively geared property into a positively geared one. Of course, speak with your accountant about all this before reaching any decisions.

Negative gearing explained: deductions

Australia income tax law will allow you to claim a tax deduction to the extent that costs you will face are connected to your investment property. Moreover, non-cash expenses should be deducted.

Some of the more common tax deductions in regards to rental income are:

  • Body Corporate Fees
  • Borrowing Cost
  • Council fees and water rates
  • Property construction costs
  • Insurance
  • Property inspections of any kind

Bear in mind that things may change over time. Taxable income could eventually exceed tax deductions, meaning your property may stop being negatively geared.

If you’re sharing a property, or have jointly-held ownership (a couple, for instance) it would be beneficial if the higher income earner of the occupants has the greater ownership interest.

Turn To iBuyNew For Help

Need help getting started? iBuyNew will point you in the right direction! Whether you are looking for apartments, townhouses or house and land packages, working closely with an iBuyNew property consultant, who understands the market, will help you find something suitable that’s tailored to your needs and requirements. Get in touch with them on 1300 123 463.

Michael Poiveson

Armed with a background in multimedia and written communications, Michael has a zest for everything outdoor living, and can be found enjoying the serenity of occasionally overlong scenic walks.

About

iBuildNew is the market leading aggregator dedicated to residential home construction and land development. As an independent platform, iBuildNew helps Australians identify and compare new home designs, house and land packages and land estates. It’s the smart way home buyers, who are considering a new build, can find the ideal options to match their individual needs. Home building is a big decision, we make sure you get it right.

You may also like

Checklist For Your Investment Property Plan

Property investment is not a simple task, and getting financially ready for an investme...
Read More
Mar 27, 2018

Understanding Property Management Fees and Services

Property management fees can be difficult to comprehend at first. There are so many dif...
Read More

House and Land Package, A Dynamic Duo and a Great In...

When considering an investment property, there are a number of key features to take not...
Read More
Jul 21, 2017

Enjoy Maximum Capital Growth When You Choose Investm...

There are a lot of misconceptions about an investment property, which is why it’s cruci...
Read More
Oct 02, 2019

Think Like An Investor And Achieve Your Investment G...

When adapting the mindset of a property investor, it is important to be well-informed w...
Read More
Mar 05, 2019

How to Set up a Self Managed Super Fund

A self-managed superannuation fund (SMSF) can be a useful vehicle to invest in property...
Read More
Jan 15, 2020

What Is Rentvesting And Is It Right For Me?

Renting in a bustling inner-suburb may give you the lifestyle that you are after and ha...
Read More
Oct 09, 2019

What Type Of Investment Property Is Right For You?

After saving up and making all the preparations, the exciting stage of choosing an inve...
Read More
May 10, 2018

Invest With Your Head Not Your Heart With These Prop...

There are a number of things appealing about property investments. Not only can they se...
Read More
May 14, 2018

Make Sure You Talk To These 3 Property Investment Ex...

Starting your investment journey can be an incredibly exciting and stressful process, b...
Read More
Oct 31, 2018

Are We Moving Towards a Buyer’s Market?

With falling markets in Sydney and Melbourne and analysts such as Louis Christopher fro...
Read More
Oct 20, 2017

Stocks Versus Property Investment: Which One is Righ...

It’s the age-old debate: stocks versus property? Anecdotally, Australians see certain s...
Read More

5 Interesting Ways to Customise When Buying Off-The-...

One of the biggest differences between a custom home and buying off-the-plan home is th...
Read More
Jun 06, 2019

6 Tips to Getting A Great Property Valuation

Property valuation is something that we often overlook. The flyer in your letterbox or ...
Read More
Mar 13, 2018

6 Things You’ll Need In Your Investment Property

Ready to start your investment property journey? Considering all aspects of your invest...
Read More
May 14, 2018

Benefits of House and Land Packages as a Rental Inve...

A house and land package can be a smart idea if you are seeking to make a property inve...
Read More
Jul 12, 2019

The Benefits Of Building An Investment Property

Although it may not seem like the most obvious choice and be very stressful, building a...
Read More
Jul 24, 2019

Guide To Building Up Your Investment Property Portfolio

It’s vital to have a solid foundation and strategic plan when it comes to securely inve...
Read More

Depreciation dilemma: old or new?

When thinking of investing in property, investors tend to focus more on the location, t...
Read More
Jul 04, 2019

Capital Gains vs. Rental Yield: Which is Better? 

It’s the age-old question when it comes to property investing: should I opt for capital...
Read More
Oct 09, 2018

What happens to property investment under a Labor go...

With the recent turmoil witnessed within the federal Liberal party that led to the very...
Read More
Jun 25, 2018

Changes to Victorian Tenancy Laws

Tenancy laws have not seen much change for the last 20 years in Victoria. Although rece...
Read More
Mar 24, 2020

Property Investment Tips: How To Make It A Success

The decision to invest in property can lead to monetary success and financial freedom. ...
Read More
Feb 26, 2019

Finding Positive Cash Flow Investment Properties Pos...

While some markets across Australia have actually shown price growth over the last year...
Read More

Get more from

Browse Investment Properties